Delhi’s liquor policy woes: Courtroom drama tells the other side of the story

Eight months after the Delhi government launched its Excise Policy 2021-22, it’s failed to achieve any of its targets. The policy – rolled out with much fanfare on November 17 – aimed to increase government revenue, promote consumer choice, prevent monopoly on liquor sale, and provide for equitable distribution of shops, among other targets. Critically, it handed over the sale of liquor entirely to private players.

The policy’s failure has now spiralled into a political circus: Delhi lieutenant governor VK Saxena suspended 11 officials for “serious lapses”; the Aam Aadmi Party accused Saxena’s predecessor of extending “special favours” to certain people; and the Bharatiya Janata Party accused the AAP of “irregularities”.

As things stand, the government last week decided to scrap the policy. This means that the government will be back in the liquor business by opening around 500 shops by the end of this year.

A cabinet note also blamed court cases filed against the policy for the shortfall of revenue. The note, a copy of which was accessed by Newslaundry, said the cases as well as interim orders passed by the Delhi High Court “led to a significant blockade of government revenue”.

According to the cabinet note, in the first quarter of the current financial year, its revenue stood at Rs 1,485 crore against a target of Rs 2,375 crore – a shortfall of 35 percent.

But a representative from an industry body told Newslaundry the government should have then challenged these court orders.

“They did not do it,” the source said.

But what were these cases and the orders passed? We take a look at some of them.

Headwinds for airport zone

In August 2021, the Puducherry-based Pixie Enterprises Private Ltd won a bid of Rs 234.99 crore to open 10 liquor retail shops in Delhi’s airport zone. As per the tender notice issued by the Delhi excise department in June, Pixie was expected to obtain a no-objection certificate from airport authorities.

Pixie’s application for an NOC was rejected. The company then approached the Delhi High Court, asking it to direct the Delhi government, Airports Authority of India, and Delhi International Airport Ltd to provide the certificate.

But the court rejected Pixie’s writ petition. In its order on October 22 last year, it said the Delhi airport had “clearly set out reasons” to reject Pixie’s request – namely that the airport “has subsisting contracts with a third party and has no additional space to accommodate the petitioner”.

This “third party” is Buddy Retail Private Ltd which, under the previous excise policy, ran seven liquor retail shops in the Delhi airport zone. Its contract with Delhi airport authorities is set to expire only in three years. Buddy had also bid in the June tender process, coming in fourth with a bid of Rs 144 crore.

Pixie’s argument was that Buddy’s liquor licence under the previous policy would no longer be valid. Given that Pixie had won this bid, its lawyer Dushyant Dave argued, “no other entity or operator can be permitted to continue to run any liquor vend at the airport”.

Dave also alleged that airport authorities had “illegally refused NOC” to Pixie to ensure that Buddy “succeeds in obtaining the licence to which the petitioner alone is entitled”.

But Delhi airport authorities argued that – under the Operations, Management and Development Agreement guidelines as per the Airports Authority of India Act, 1994 – it could not be compelled by the Delhi government to enter into an agreement with a third party. The central government has exclusive jurisdiction over the airport zone, the airport’s lawyers said.

It should be noted that liquor is a state subject while aviation is not.

Meanwhile, the Delhi government’s counsel Rahul Mehra said that as per its tender notice, if a successful bidder fails to get an NOC, another bidder who manages to do so will be granted a licence. In this case, he said, the first three bidders failed to get an NOC so the licence was granted to Buddy.

The court finally rejected Pixie’s petition. The Delhi government then returned Pixie’s deposit of Rs 30 crore.

Fewer brand registrations

Another high court case involved a group of liquor vends, who moved the court seeking a concession in the licence fee. They sought this concession because the Delhi government has only 519 of 1,171 brands registered with MRPs fixed until last December.

A liquor brand must register with the Delhi excise department in order to retail in Delhi. According to the petitioners, fewer brands registering leads to lower consumer choice, leading to loss in revenue for vends.

The government’s response was that it had no pending application to register brands.

Justice Rekha Pillai then dismissed the plea on December 9, saying a “substantial number of brands already stand registered with their MRPs having been duly fixed”. Hence there was “no reason as to why the petitioners should not be directed to commence payment of the licence fee”.

The judge did allow vendors to pay only 75 percent of the fee from November 17 to 30 due to fewer brand registrations. The court also asked the government not to charge fees for the first 16 days of November 2021 since the policy came into effect from November 17.

Non-conforming areas

The court’s December 9 order also permitted liquor vendors to not pay licence fees for 67 wards. These wards fall in “non-conforming zones in unauthorised colonies”, where commercial activity is prohibited.

The excise department had said it would consider liquor vends even in non-permissible areas with prior approval from the government. But, as argued in court, only civic bodies and the Delhi Development Authority can reclassify non-conforming areas.

The new excise policy had permitted around 130 shops to open in “non-conforming areas”. Delhi’s municipal corporations, which are led by the BJP, said this violated the Master Plan Delhi 2041. Thought the MPD 2041 is yet to be finalised, the 2021 document says: “Any trade or activity involving any kind of obnoxious, hazardous, inflammable, noncompatible and polluting substance or process shall not be permitted.” Liquor shops can't be opened even in the mixed use areas (residential areas on main roads that can be used for commercial purposes), according to the document.

After the court order, the Delhi excise department said in February that shops in non-conforming areas could shift to other areas, but not many did so.

The court’s interim order of December 9 prompted other liquor vends to take the judicial route for exemptions.

For instance, Magunta Agro Farms Pvt. Ltd, a liquor company, had won a bid for a zone that the municipal corporation deemed an “undeclared non-conforming zone”. Magunta then approached the court seeking an exemption from paying a licence fee. The government opposed the plea, saying the company was at liberty to move to another zone.

Similarly, JSN Infratech Ltd, a Delhi-based company than runs 50 liquor shops in the capital, sought the waiving of its licence fee since one of the wards it was operating in was “liable to be classified as a non-conforming” zone by the South Delhi Municipal Corporation. The high court, on April 12, said JSN could claim relief if a committee formed by lieutenant-governor Saxena endorsed the SDMC’s view. A source at Saxena’s office told Newslaundry he was unaware of the formation of such a committee.

Vends near gurdwara

In January, a Chanakyapuri gurdwara sought the cancellation of a shop’s liquor licence for being within 100 metres of two educational institutions and the gurdwara itself. In its petition to the court, the gurdwara called this a “flagrant violation” of the Delhi excise policy and rule 51(1) of the Delhi Excise Rules, 2010.

The government said the petitioner had “misrepresented” the rules, saying the two institutions were more than 100 metres away from the liquor shop and that the gurdwara was a kuchha structure which, therefore, was not covered by rule 51(1).

But by May, the excise department established that the gurdwara was actually a pucca structure and the shop’s liquor licence was cancelled.

Worries about ‘cartelisation’

In June last year, Readymade Plaza India Pvt. Ltd, a group of retail liquor vendors, sought a high court stay on the excise policy, claiming it would lead to cartelisation. Over the months, other petitioners filed similar pleas, including BJP MP Parvesh Sahib Singh Verma.

Appearing for Readymade, lawyer Mukul Rohatgi told the court that “the entire thing is monopolised by the Delhi government for big people. This is complete exclusion of small people who were having licences for last various years”.

The matter is pending before the high court. Yet Rohatgi’s fears were echoed in the August 1 cabinet note: “The provision of discounts on liquor sales has given rise to unhealthy practices and has also contributed to weeding out of weaker hands.”

Newslaundry telephoned AAP spokesperson Saurabh Bhardwaj to ask about these cases but received no response. We also emailed deputy chief minister Manish Sisodia. This report will be updated if a response is received.