Report No.1 of 2019 - Pricing of Production and Sale of Liquor (State Excise Department), Government of Uttar Pradesh

Overview

This Report contains findings of Audit on “Pricing of Production and Sale of Liquor” involving financial effect of Rs 24,805.96 crore. This Report contains five Chapters. Some of the important audit findings are as follows:

Irregular creation of Special Zone – As per the Excise Policy 2009-10, a special zone (Meerut) was created to check smuggling of liquor into the State of Uttar Pradesh from the neighbouring States. However, two border districts (Aligarh and Mathura) were not included and seven districts which did not share borders with any of the neighboring states were included in the special zone. Therefore, creation of the special zone was not based on any clear criteria. Moreover, creation of special zone did not have desired impact, yet it continued over next nine years.

Licensing of retail shops - Licenses for retail shops in all the four zones were renewed continuously for nine years (2009-18) without resorting to any form of open tendering on annual basis eliminating any possibility of competition in production and sale of liquor at reasonable rates.

Excess fixation of EDP/ EBP - The State Excise Policies (2008-18) allowed unchecked discretion to the distilleries/ breweries in determining the ex-distillery and ex-brewery price of IMFL and Beer, allowing them to inflate the ex-distillery and ex-brewery price of both the identical and the similar brands of liquor (IMFL and Beer) much higher (46 and 135 per cent) as compared to the neighbouring states leading to accrual of undue gains to them to the tune of Rs. 5,525.02 crore during 2008-18 at the cost of the State Exchequer/consumers. Undue advantage also accrued to the wholesalers and the retailers (in case of IMFL) to the tune of Rs 1,643.61 crore due to higher EDP.

Short fixation of Minimum Guaranteed Quantity (MGQ) of Country Liquor - Short fixation of MGQ of country liquor during 2011-18 led to potential revenue loss of Rs 3,674.80 crore.

Non-fixation of MGQ of IMFL and Beer - Unlike country liquor, the Excise Department did not fix MGQ of lifting of IMFL and Beer leading to potential revenue loss amounting to Rs 13,246.97 crore.

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