The liquor policy implemented by the Delhi government in November 2021, and later scrapped in September 2022, has emerged as a major controversy, particularly from an economic and governance standpoint. A recent report by the Comptroller and Auditor General (CAG), tabled in the Delhi Assembly, has laid bare the financial impact of the policy, highlighting a staggering loss of INR 2,002.68 crore to the exchequer. This revelation has significant implications not only for governance but also for the hospitality industry in the region, which was indirectly affected by the policy’s instability.
The policy, aimed at reforming and privatizing liquor retail, soon became a source of controversy, with corruption allegations tarnishing the image of the Aam Aadmi Party (AAP) government. This political scandal resulted in the imprisonment of prominent leaders, including then Chief Minister Arvind Kejriwal and Deputy Chief Minister Manish Sisodia. Beyond the political fallout, the policy’s missteps disrupted the hospitality ecosystem, which relies heavily on a stable and well-regulated excise framework for smooth operations.
According to the CAG report, a significant portion of the revenue loss—INR 941.53 crore—was attributed to the inability to open liquor shops in non-conforming areas. These areas, deemed unsuitable due to land-use norms, saw no operational liquor vends, depriving the government of substantial excise revenue. This decision not only impacted state revenue but also created a ripple effect on the hospitality industry, limiting access to regulated liquor supplies and affecting consumer demand in these zones.
Another critical lapse identified was the failure to issue tenders for 19 zones where liquor licenses had been surrendered. This oversight resulted in a loss of INR 890.15 crore, as no alternative arrangements were made to ensure the continuity of liquor retail in these zones. For the hospitality sector, which depends on reliable liquor availability for restaurants, bars, and hotels, such disruptions likely led to operational challenges and customer dissatisfaction.
The report further highlighted a revenue loss of INR 144 crore due to fee waivers granted to licensees under the pretext of Covid-19 relief. While the pandemic did necessitate certain concessions, the blanket waiver appears to have lacked a comprehensive assessment of its financial impact. An additional INR 27 crore loss was attributed to errors in the collection of security deposits from zonal licensees.
The scrapping of the policy in September 2022, following public and political backlash, compounded the uncertainty for the hospitality industry. Businesses that had aligned their operations with the policy’s initial framework were left in the lurch, grappling with abrupt changes and inconsistent supply chains. The absence of a clear contingency plan further deepened the operational challenges for both liquor vendors and hospitality establishments.
This entire episode serves as a cautionary tale for policymakers and stakeholders in the hospitality industry. Stability and transparency in liquor policies are essential, not only for ensuring state revenue but also for supporting the hospitality sector, which plays a pivotal role in local economies.
