Blog: Delhi Excise 21-22 Policy means more Obfuscation

Google it and it would say that the Oxford Dictionary defines it as the action of making something obscure, unclear, or unintelligible. Cambridge Dictionary Obfuscation as- making something less clear and harder to understand, especially intentionally. I hope you get my point. Most governments are experts in this area but the Delhi government takes the cake. The excise policy that was to be effective on April 2021 has been effectively extended to 17 November (7.5 months into the current year). A record if you look at the past record of October last year but no one still seems to comprehend where the policy is going except that the Delhi wine and liquor market is going dry gradually and the neighbouring Gurgaon is raking it in with the last year’s sales targets already having been reportedly crossed.

The circular dated 10-9-2021 by the Deputy Commissioner (Excise) seems simple enough, on the face of it. Due to the new policy taking its time for bringing into shape, all the old licenses are being extended to 16 November, by paying the pro-rata charges. This includes the L-1 license which allows distribution at an annual license fee. But the goods can be sold only to the licensed shops-the private shops get L-7 license. While the government shops which work on L-6 series and are allowed to sell off their goods by 16 November, the Policy Order is explicitly quiet about the L-7 License. This implies that the private shops will not be allowed to extend their licenses beyond 30 September. So these shops MUST shut shops by 30 September with all its obvious ramifications.

Also Read : Whopping Jump in Tax Revenue assured for Delhi Excise in 2021-22

However, the new shops are soon to come up under the new policy that gave License to 32 vends dividing the whole city into 32 zones, 20 of which have been allotted but the rest were not allotted and the new bids had been invited, according to our sources and till last Monday the bids had still not been evaluated. The 20 zones must organise the shops in a hurry in order to place the order from the current distributors holding the L-1 License, which in itself would be a Herculean Task considering that the cost of licensing for each shop will go up to around Rs. 8 crores while the current license fee has been only Rs. 8 lakhs.

The retailers are not ‘washed in milk’ as the saying goes. The equivalent shops go for around Rs. 3 Crores in the neighbouring Gurgaon. The high rents in Delhi notwithstanding, the retailers demand a fixed percentage to sell any product-and it goes as high as 35% of the MRP! The existing retailers would perhaps have to work with the zone bidders as their satellite firms in some form or the other, thus impacting their hitherto windfall profits. Bigger the clique, and less known the product, more margin was demanded (all under-handed, of course and it went to the pockets of the owners or the senior employees). The government has beautifully taken the rug under their feet, but the problem is in implementation.

The excise and VAT have been reportedly reduced to 1% of MRP and the product can be sold at any price though there would be an MRP and it cannot be sold at a higher price.

The Policy may have its benefits for the government in terms of higher collection but the trades rue that practical points have not been considered. It may also be added that in Delhi Licenses are not on a perpetual basis but renewed every year at government’s sweet will. The traders confide in private that any form of litigation would result in the petitioner losing the case since every licensee had signed before getting any extension that he/she would not fight a legal case of any kind against the government.

Also Read : Blog: Delhi Excise getting ready to improve Wine and Liquor Policy

Be as it may, there is a lot of confusion right now. With the private shops with L-1 till 30 September being shut on 30 September and the new shops to be opened by the new vends under L-7 Z not perhaps able to stock up, the availability in Delhi will become a big problem and the chances of Delhi going dry are very much there. However, Gurgaon shops are hoping just for that- their already booming sales would grow even more till the policy is properly in place. Many of the new Vend Bid winners have no experience of selling liquor in Delhi or no experience of selling wine and liquor at all. They have entered the fray only because of high margins expected in the trade. They may not enjoy a profitable experience even if the source of capital infusion might be dubious.

Delhi is expected to compete with Haryana which is much better organised and is more aggressive in pricing. Lower label registration charges also help the shops keep the prices lower than Delhi. Only time will tell how long they can beat the Delhi market. On-trade businesses have to buy from the L-7 z shops but retail customers can slyly pick up their requirement from across the border. This is expected to encourage the bootlegging business and a loss, not as much to the exchequer as the zone bid winners or the shops which are expected to cough up to Rs. 10 Cr to these winners, in addition to the rent and other expenses of logistics and overheads.

It is interesting to observe that the change in drinking age from 25 years to 21 years is still not officially intimated through the gazetted notification-and without that it cannot be enforced.

Also Read : Reforms expected in Delhi Excise Policy for 2021-22

It would be an interesting scenario. Hopefully, with the teething troubles taken care of, the policy would stabilize and the business normalcy would return, though Haryana would always be ogling the exciting and increasing Delhi wine and liquor market. Someone, somehow would have to pay the price!

Let us hope it is not the consumer who loses out in the end.

Policy Order

Subhash Arora

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