AAPnomics: Revenue loss for the state, windfall for drink cartels

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Arvind Kejriwal’s 2021-22 excise tax policy is considered a case study on how government money can be diverted to liquor cartels, causing a huge loss to state revenues

Delhi Chief Minister Arvind Kejriwal. ANI

Celebrated British poet TS Eliot ends his 1925 poem, “Hollow Men,” with the lines: “This is the way the world ends, not with a bang, but with a wail.” A party that rose to power in Delhi in a surge in popularity for its alleged fight against corruption has just signed a confession about being corrupt.

For the first time in post-independence history, we have a case of a minister criticizing a proposal he himself tried in cabinet. After the Delhi cabinet approved the 2021-22 abolition of excise tax policy, Manish Sisodia said, “They (BJP) are threatening shopkeepers, agents with ED and CBI, they want legal liquor stores to be closed in Delhi and monetize illegal shops. We have decided to end the new liquor policy and have ordered the opening of government liquor stores.”

That the city’s finance minister was mad about the matter was clear from a statement issued the same day, which read: “We have put in place a new alcohol policy to stop corruption. Before that, the government received about Rs 6,000 crore revenue from 850 liquor stores. But after the new policy, our government would have gotten more than Rs 9,000 crore with the same number of stores.”

Can a government sound so helpless, can ministers of a government that was on a dharna in Raj Niwas headed by their Chief Minister Arvind Kejriwal act so meekly against the ‘threats’ of the Delhi BJP leaders? The point to be noted is that the cabinet decision to abolish the 2021-22 excise tax policy came after a police investigation into the policy and a confrontation with the lieutenant governor who has sought a CBI investigation into the case, based on a report of the chief secretary.

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The report alleges that there are illegitimate benefits to liquor licenses over “kickbacks” and “commissions” and the use of the money in the Punjab elections. The cabinet note on which the Delhi cabinet led by Kejriwal made the decision to abandon the policy is a telling document about the magnitude of the loss of government revenue.

Kejriwal’s 2021-22 excise tax policy is considered a case study on how public money can be funneled into liquor cartels, causing a huge loss to state revenues. The Kejriwal government’s financial planning, which could be called AAPnomics, focused on “loss of revenue” for the state and “windfall gains” for cartels.

The cabinet note circulated at the meeting in which the excise policy was abandoned, underlining the “revenue shortfall”, stating: “During the first quarter of the current fiscal year (2022-23), Rs 1,485 was realized, which is 37.51 percent lower than the budget estimates for the current fiscal i.e. Rs 2,375 for Q 1. Even this includes Rs 980 crore in refundable security deposit.” On the issue of “license windfall windfalls,” the note says: “Furthermore, 09 zonal retail licensees have not taken advantage of renewal during the April 2022 renewal period and 03 more zonal retail licensees have indicated their intent not to use the renewal thereafter. July 2022. Out of 14 wholesale licensees so far, 04 wholesale licensees have chosen to discontinue their license. The revenue decline due to surrendered zones is estimated to be about Rs 193.95 crore per month.”

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The cabinet note goes on to explain in detail the ‘windfall windfalls’ for the cartels, saying: “It is pertinent to note that while the Treasury is losing significant revenue as a result of the zones holiday, there has been no drop in sales. of spirits and the slack has only been picked up by the other licensees, which is a windfall for them.Excise data shows that the sales of spirits in the first quarter of the current drink in the first quarter of the current fiscal year 2022-23 increased by 59.46 percent in the case of whiskey and to 87.25 percent in the case of wine compared to the corresponding period of FY 2019-20, but the same could not be seen as an increase in the government revenue.”

In another mention of strengthening cartels, the note states in section 2.5: “Providing discounts on liquor sales has led to unhealthy market practices and has also helped to eradicate weaker hands. If the same continues during the renewal period, there is a good chance that even more suppliers will surrender their licenses, which will negatively affect government revenues.”

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It didn’t stop there. The government memorandum in section 2.6 specifically mentions the promotion of selected drink brands in the city and the creation of monopolies. The note read: “There have been cases of shortages of certain brands. Imported premium brands, in particular, have been out of stock for quite some time, as the sole wholesaler of such brands has ceased deliveries. In Excise Policy, 2021-22, a certain trademark registration by an involved wholesaler is limited to a certain brand, which can lead to monopolistic tendencies.”

Days after boycotting a function attended by the Lieutenant Governor, Prime Minister Kejriwal has now visited the Raj Niwas and his amenable statements afterwards clearly show that he is trying to buy peace. With one of his ministers Satyendar Jain already behind bars in a corruption case, he cannot afford to trample on the ‘head of government of Delhi’.

However, the Lieutenant Governor’s constitutional obligation requires that the investigations ordered in this case not be delayed. Delhi needs redemption, the lieutenant governor is best placed to deliver it.

The writer is author and president of the Center for Reforms, Development & Justice. Opinions expressed are personal.

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