The Aakhya Weekly #46 | Of Intoxication and Incarceration

May 05, 2023

In Focus: Madhushala II: Twin Battles

This is the second of a two part series on Delhi’s liquor business and the surrounding controversies. Click here to see part I.

“Qaid jahaan mai hoon, ki jai qaid wahin par madhushala.”
(Where I am prisoner, imprison, there, the alehouse.)
- Harivansh Rai Bachchan, Madhushala

It was November, 2021.

The brutal North Indian heat was finally waning. Cold, crisp mornings gave way to pleasant, balmy afternoons; a slight chill seeped into the night. The summer gone by had reeked of death. The streets had been empty, the markets deserted. Hospitals were choked with people gasping desperately for air they could not breathe. The Ganga was littered with rotting flesh, for crematoriums had neither wood nor people.

But with the winter came hope. The delta wave, having claimed at least a quarter of a million lives, had released its grip. Furtively, cautiously, people stepped out for a taste of normalcy.

It was in these odd, unsettled days that Delhi debuted its new liquor policy to much fanfare.

The early days

There was much that the new policy promised. The Government would withdraw completely from liquor trade. Delhi would be divided into 30 zones, 27 privately-owned stores to a zone. A total of 849 private licenses would be granted, many of which would be in “non-conforming areas” – areas that were not otherwise marked for commercial activity.

The new stores would boast “walk-in” experiences – a respite from the long queues that Delhi’s alcohol shops were associated with. They would be air conditioned and well-stocked, serving a mix of popular and niche brands. The city was even permitted five “super-premium” stores – massive, swanky outlets that stocked prime brands in glitzy displays. Sellers were no longer forced to adhere to Government-defined rates, and could now offer discounts. Bars and restaurants, too, could breathe easy - the legal drinking age would be lowered, processes would be simplified and restrictions would be lowered. An archaic, heavily regulated business would enter the modern age overnight.

For a month and a half, private stores were asked to shut, while Government stores cleared out their stocks. And then, on November 17, the new stores made their entrance. Despite various teething troubles, they were an instant success. Vendors offered massive discounts and other sops, which Delhiites lapped up eagerly. There was little, in those halcyon days, which pointed to the carnage which would follow.

The Delhi BJP, in opposition, fired its opening salvos. Rampant alcoholism would break up families, it claimed. Women would take to liquor, passing out on streets. Their safety would be threatened. The party organised signature campaigns and blocked roads in protest.

Its most potent campaign, however, was against stores opened in non-conforming areas, for here, the party had real power. It held the city’s municipal corporations, and thus oversaw land use in the city. The corporations kicked into gear, sending notices and shutting down stores outside commercial areas. In response, Delhi’s Excise Department permitted affected licensees to reopen stores in commercial areas. This would prove to be a fatal error.

For now, however, the ruling AAP Government’s alcohol push continued unabated. It slashed the number of dry days in the city – from 21 to a mere 3. The city also mooted the home delivery of alcohol. The real stakes, after all, were not in the AAP-BJP political showdown, but in an older, more pronounced battle for revenue.

A tale of two cities

Liquor, as we saw in Part I, is vital to a state’s revenue. Delhi is particularly vulnerable to a loss of this revenue. Encircled by Haryana and Uttar Pradesh, its residents can easily escape to neighbouring cities to access better excise regimes. This anxiety is writ large in its 2021-22 excise policy, which makes multiple references to the arbitrage opportunities that “neighbouring states” present.

The city’s biggest challenge comes from its newer, shinier cousin to the south-west: Gurgaon. Delhiites would routinely drive to Gurgaon’s glistening liquor stores, which offered more choice at cheap rates. With the new excise policy, however, Delhi found the ammunition to retaliate. Delhi’s retailers began to offer aggressive discounts, leaving Gurgaon’s liquor businesses in a tizzy. Gurgaon’s liquor retailers protested for parity with Delhi. It was forced to retaliate. A brutal price war ensued, leaving customers delighted. Crowds rushed to cash in, forming lines for hundreds of metres. They caused a brief COVID scare, forcing Delhi to suspend discounts, accusing retailers of treating liquor shops “like a Zara store.” This allowed Gurgaon to regain steam, however, and Delhi soon relented – reintroducing discounts. Prices bottomed out. The two cities battled furiously, settling into an uneasy equilibrium – Gurgaon was where it was easy to find alcohol, even late into the night, while Delhi became the city for quality liquor.

The Haryana Government took various measures to blunt Delhi’s charge. It reduced its legal drinking age to 21, and later, slashed taxes on liquor. This would soon become the least of Delhi’s troubles, however. Dark clouds were gathering on the horizon.

The collapse

In the next iteration of its excise policy, the Delhi Government had promised deep discounts and the home delivery of alcohol. However, Delhi’s Lieutenant Governor, Vinai Saxena (LG) refused to approve the policy – in the latest chapter of a long-standing tiff.

It soon emerged that Delhi’s Chief Secretary, Naresh Kumar had prepared a report, alleging that the LG’s approval was not taken when licensees were permitted to shift from non-conforming areas to commercial ones. There were various other tweaks and fee waivers that the Government had given while side-stepping the LG, supposedly for the undue benefit of private players. Based on the report, the LG called for a CBI investigation.

The Delhi Congress had alleged, in May, that the Government took large bribes to liberalise Delhi’s liquor trade. A month later, BJP member Maninder Sirsa wrote to the CBI and the ED, claiming that Delhi’s excise policy contained processes specifically added to favour certain large liquor distributors, at their behest. For this favour, he alleged, kickbacks were given to excise department officials and ministers, led by Deputy Chief Minister, Manish Sisodia. Retailers, too, alleged that the policy unduly favoured wholesalers.

Meanwhile, the scars of a prolonged price war were becoming visible in Delhi’s nascent alcohol industry. Hundreds of stores shut down, unable to compete with the discounts that were on offer. Their losses were compounded by the BJP’s sustained protests. Shops fled 9 of Delhi’s 32 zones. South Delhi’s elite neighbourhoods ran dry. Then, on June 30, the Delhi Government struck the death knell for the city’s alcohol industry. The liquor policy was withdrawn, supposedly to prevent illegal trade in liquor. Private players were to exit the business altogether. The Government would take over the entire industry.

In the coming days, the city suffered severe alcohol shortages. Meanwhile, private players were left stranded with 70 lakh bottles of liquor. Workers’ futures became uncertain. As Delhi’s four Government corporations slowly reopened alcohol trade, illicit liquor and bootlegging ran riot.

The withdrawal of the policy, however, came too late – the CBI and the ED had begun their investigations in earnest. The AAP and the BJP traded furious barbs, as the agencies made a string of arrests. With people and entities across the spectrum being implicated – ranging from manufacturers to wholesalers, from politicians to restaurateurs – it is difficult to piece together the entire alleged scam from public reports. Only a few strands seem clear. Vijay Nair, AAP’s quiet, enigmatic communications in-charge, allegedly collected money for AAP, which was then used to fund its electoral campaigns. He supposedly received INR 100 crore from the “South Group” – a collection of politicians and businessmen from South India. In exchange, the South Group was purportedly offered a stake in Indo Spirits, a liquor distributor, which was in turn given the wholesale business of French liquor giant, Pernod Ricard. Pernod Ricard also allegedly funded retailers, in exchange for them pushing its products. Mr. Sisodia, who has been in jail since February, supposedly played the most vital role, formulating and implementing the liquor policy to further the conspiracy, as per a CBI chargesheet.

The pincer shuts

Ultimately, the political tussle between the AAP and the BJP is irrelevant, when compared to the fate of Delhi’s people. The city continues to face chronic liquor shortages. Private stores are yet to return. Popular brands are unavailable, including the many major brands held by Pernod Ricard – Jameson, Chivas Regal, Jack Daniels, Absolut, and more. The city’s restaurants and bars have suffered massive losses, with footfall declining by 40%. The Delhi airport no longer has liquor stores – as Government corporations bicker with the airport authority over rent amounts.

Delhi is reportedly coming out with a progressive new excise policy that will bring the private sector back to the alcohol business, but the same is bound up in delays. In the meanwhile, however, the states enveloping Delhi closed upon it like a pincer, biting into its liquor business with glee. Sales in Gurgaon, of course, sky-rocketed. Faridabad had record excise revenues by March this year, with a quarter of its annual revenue cycle still left. While Uttar Pradesh was once a laggard in the liquor war, it has now formulated its own liberal liquor policy, with special sops for Noida.

Of the many political questions this episode throws up, perhaps the most important is: how well was Delhi served by the political system? And there, the answer is clear. As Governments cannibalise one another, Delhi’s residents cannot access alcohol, its businesses have been financially crippled, and illicit trade continues. With the loss of business has come a loss of revenue, revenue that should have gone into schools and hospitals. The pincer has shut. The system has failed.

This Week in Policy

Economy and Taxation

India reports an all-time high in monthly GST collections, with INR 1.87 lakh crore flowing into the Government’s coffers in April 2023. Year-on-year, April saw a 12% growth from the same month last year.
In a move that may bring much-needed clarity to India’s start-up ecosystem, tax authorities may accept FEMA valuation criteria for the purpose of calculating the fair market value of a start-up, which may help start-ups avoid paying the so called “angel tax”.

Sustainability and Energy

Gujarat clears 1.99 lakh hectares of land in Kutch and Banaskantha districts for green hydrogen development. The land parcels have received in principle clearance from the state government and will be distributed among five private sector players at Rs 15,000/hectare on 40-year leases.
Ministry of Heavy Industries pushes deadline for obtaining the mandatory electric vehicle battery test certification by six months to October 1, 2023 after receiving multiple demands from the private sector for the same.

Emerging Technology and Media

The Department of Telecommunications will be sending the Telecom Bill for inter-ministerial consultation ahead of the upcoming Monsoon Session of Parliament, when it is likely to be tabled.
The Government will likely release the first draft of the Digital India Bill (intended to replace the Information Technology Act, 2000) for public consultation by late July (or early August) 2023.
Following an elaborate consultation process that spanned several months, the Telecom Regulatory Authority of India (TRAI) has released its recommendations on “Ease of Doing Business” in Telecom and Broadcasting Sector.

International Trade and Foreign Affairs

UK’s FTA negotiator Harjinder Kang who has led talks for the British side on the India-UK FTA has been appointed as UK’s new Trade Commissioner to South Asia and Deputy High Commissioner for Western India.
India’s Finance Minister Nirmala Sitharaman held a bilateral meeting with her South Korean counterpart Choo Kyung-ho and emphasised on greater opportunities for investments in India in sectors like manufacturing, food processing, and marine resources.
India and Russia have suspended negotiations to settle bilateral trade payments in Indian rupees.

Banking, Finance and Insurance

RBI and SEBI refuse to give the European Securities and Market Authority (ESMA) supervisory powers over Indian clearing corporations servicing European banks, ignoring the 30th April deadline set by the European regulator.

Logistics and Infrastructure

Indian Railways has decided to raise the sectional speed of 53 important broad-gauge routes across the country to 130 kmph. The move is expected to reduce the travel time and enhance the operational efficiency of the trains and also give a boost to freight operations.
The government of Uttar Pradesh has identified 600 hectares of land in six districts to set up manufacturing and logistics sectors. The proposed mega clusters will come around Purvanchal and Bundelkhand expressways.

Labour

Delhi Labour Minister, Sri Raaj Kumar Anand has approved a draft of the Delhi Occupational Safety, Health and Working Conditions Rules, 2023.
Tamil Nadu withdraws its bill permitting 12-hour work days, in the face of sustained opposition from political parties and trade unions.

Tracking the G20

In a rather slow week for the G20 in India, the 3rd meeting of the Education Working Group wrapped up successfully in Bhubaneswar. The discussions at the three day seminar focused around priority area three of the working group - ‘Building Capacities, promoting life-long learning in context of future of work’.

In this week’s notable coverage, Girish Chandra Murmu, the Comptroller & Auditor General (CAG) of India pens a blueprint for India’s blue economy in this op-ed in the Indian Express. The CAG is the chair of the engagement group of Supreme Audit Institutions (SAl) 20, which has two priority areas under the current presidency, namely the blue economy and responsible Artificial Intelligence.

Upcoming Events

Webinar on Plastic EPR Framework 2023 - Prospects & Problems

May 8 | Virtual

CII is organizing a webinar on ‘Plastic EPR Framework 2023- Prospects & Problems’ on 8th May, 2023 in a virtual format. The objective of this webinar bring together experts and stakeholders from the industry, government, and civil society to discuss the current state of the Plastic EPR framework in India, explore the opportunities and challenges in the implementation of the framework, the role of stakeholders in ensuring its success, and the need for a collaborative approach toward a sustainable and circular economy. More Information | Registration Link

A Few Good Reads

Petroleum and Natural Gas Minister Hardeep Puri lays out India’s energy strategy.
Pranay Kotasthane, in an engaging interview with Rest of World, gives his take on the US-China chip war and its implications for India.
Why is India’s statistical machinery so poorly rated by the World Bank? Bibek Debroy and Aditya Sinha dive in.
Acrimony towards India, Brahma Chellaney believes, was a grave error by China - one that will shape Asia for decades to come.
In a controversial and provocative article, Ashley Tellis questions American hopes that India will join any military coalition against China.

Tweets of the Week

Ajay Banga has been selected as the President of the World Bank:

India wins its first Asian gold in Badminton in 58 years:

Spitting facts:

Key Notifications and Reports

The World Economic Forum has released its Future of Jobs report for 2023.
TRAI has released its recommendations on the ease of doing business in the telecom sector.
The Lok Sabha Secretariat has announced the composition of the Public Accounts committee of the Parliament.
The NITI Aayog has prepared a compendium on best practices in the social sector for the year 2023.
Chartered accountants, cost accountants and company secretaries have been made “reporting entities” under the Prevention of Money Laundering Act, 2002.

The Aakhya Weekly