New liquor policy targets proxy ownership of vends

Under the Capital’s current 2010 excise policy, a retail licensee is prohibited from opening more than one liquor shop. If a licensee flouts ownership rules, their license is liable for cancellation.

Several individuals and groups in Delhi own multiple liquor retail licences but list them under different names and addresses, official records reviewed by HT show, highlighting a clear flouting of rules, proxy ownership and cartelisation.

Currently retail liquor license are given simply through an application process, and pays ₹8 lakh. (HT file photo)

Under the Capital’s current 2010 excise policy, a retail licensee is prohibited from opening more than one liquor shop. If a licensee flouts ownership rules, their license is liable for cancellation.

But official records show private vends are controlled only by a few individuals or groups, with some owning more than 20 shops across the city. The excise license name for each liquor shop in Delhi is different. Many of them list a private company, and others different individuals.

“The problem right now goes beyond just the issue of proxy ownership. It has rather evolved into cartelisation with a few retailers even getting into manufacturing cheaper variants. It negatively affects the customer’s experience as many of the renowned and top-selling labels remain ostensibly out of stock in the shelves of Delhi’s shops,” said a senior government official on condition of anonymity.

For example, the records show that one individual owns 30 retail liquor licences but lists them under different names, ranging from firms dealing in investment, insurance, communication, steel, fabric, automobile, travel, appliance, furnishings, export and wires. The addresses range from northwest Delhi, Shahdara, Vasant Kunj, Inderlok, Rohini, Seelampur and Saket.

Currently retail liquor license are given simply through an application process, and pays ₹8 lakh. But experts say the process is opaque, and the same individuals own multiple shops, hold vend licences and manufacturing deals, making it difficult for the government to crack down on cartels pushing particular brands or suppressing revenue.

“This happened through proxy ownership. It’s true that neither the existing rules nor the proposed one has provision to target proxy ownership. We will look into this and try to make the proposed rules more stringent,” said the official quoted above.

The city government says that recommendations made by a group of ministers, made public last month, is aimed at doing away with this opaque process of allotting licences and make payments upfront. The recommendations are yet to be compiled into a draft policy or sent to the lieutenant governor.

The new proposed policy divides Delhi’s liquor retail trade in 32 zones — including the airport and an NDMC zone — where the existing 849 vends will be redistributed equitably. It intends to end the system of collecting license fees separately for each store and instead plans to collect an upfront license fee on the basis of the 32 new zones created. Each zone will have at least 27 liquor vends - all of which will go to one successful bidder.

“To prevent cartelisation and market capture, no entity will be allocated more than two zones. Also, no manufacturer will be allowed to own retail vends. This will curb the creation of syndicates which leads to overcharging and brand pushing,” a second government official said.

But some of the vendors who own multiple shops said the new policy will not resolve the problem.

“We agree that the new rules will ensure quality and premium liquor is made available to the people of Delhi in abundance. But, in Delhi we have a lot of consumers who do not continuously stock liquor from Haryana which has cheaper rates. Since that category of consumers form a large chunk, owners of several zones may mutually decide to keep prices of certain bottles high from time to time. In the end, they will recover the high license fee from the consumers only,” said the vendor who owns 30 stores under different names and addresses.

Prashant Arora, a liquor trader in the city, said the new proposed policy will not end proxy ownership or cartelisation, but will merely change the set of people indulging in it. “Firstly, we need to understand that the Delhi government’s proposal will help bring only the biggest market players of the industry to the city. This is because they have kept the EMD [earnest money deposit ] as high as ₹30 crore which will be in addition to the bid price for the zone, whereas, at present, the license fee for a private liquor shop is ₹8 lakh only,” he said.

“Secondly, the suggested rules have the scope of taking cartelisation and proxy ownership to new heights. For instance, my company won the bid for two zones which means I already have 54 vends with me. Now, I can associate or partner with another company to make it win the bids for other zones as well. So, what is allegedly happening now will happen then also, but in a much bigger and sophisticated way,” said Arora.

Delhi government rejected the charges and said the new proposed policy would usher in transparency. “The plan is to end the system of fixing the maximum retail price (MRP) of alcohol, while leaving it to market forces, and allow retailers and wholesalers to offer discounts on the sale of liquor in the city - something which was never allowed in Delhi but is permitted in the neighbouring city of Gurugram,” said the first official quoted above.