In a remarkable turn of events, Uttar Pradesh’s excise department has emerged as a revenue powerhouse, raking in an impressive sum of Rs 42,250 crore in FY23, catapulting the state to the forefront of revenue generation among Indian states. Notably, the National Capital Region’s towns, Ghaziabad and Noida, play a significant role in contributing to this revenue. In stark contrast, neighboring Delhi grapples with the fallout of its recently withdrawn excise policy from 2021-22.
The Delhi government, led by the Aam Aadmi Party, had introduced a transformative excise policy in November 2021, aiming to shift the reins of the retail liquor business from the government to private entities. However, this policy quickly became the center of controversy.
While both Delhi and UP embraced policies promoting private participation in the liquor sector, they diverged significantly in outcomes. Delhi’s policy, despite its progressive intent, faced substantial challenges.
The key distinction between the two states’ policies lies in their fundamental approach. Delhi followed a license-based model, focusing on extracting revenue through high license fees while keeping excise duty comparatively low. In contrast, UP adopted a consumption-based model, where license fees remained minimal, and excise duty rates were higher.
Delhi’s policy awarded liquor licenses through open bidding, resulting in allegations of favoritism and cartelization. In contrast, UP implemented an e-lottery system, allowing smaller players to enter the industry. This approach facilitated a level playing field and broke the monopoly held by large liquor businesses.
Regarding eligibility for licenses, Delhi mandated stringent turnover criteria for wholesale liquor licenses, creating barriers for smaller players. In UP, no such turnover prerequisites exist. Solvency certificates, equivalent to the license fee, serve as the primary requirement for obtaining a wholesale liquor license.
Delhi also imposed strict carpeting area stipulations, complicating matters for liquor store owners. UP, on the other hand, adopted a flexible approach, providing businesses more leeway in this regard.
Allotment of vends in Delhi allowed for significant concentration, with individuals or entities owning multiple retail stores, potentially leading to monopolies. In UP, the system limits an individual to two retail stores, fostering competition.
Discounting mechanisms also differentiated the two states. Delhi’s excise department initially permitted discounts, leading to significant price reductions and promotions like ‘buy-one-get-one-free.’ Later, restrictions were imposed. In UP, prices are set by the excise department without discounting mechanisms, contributing to revenue generation primarily through excise duty.