Tipsy Liquor Policy
H B Soumya
"And when I'm dead, dont bury me at all,
Just pickle my bones in alcohol,
An amphora of wine at my head and feet,
And then I'm sure my bones will keep"
These lines are from Goscinny and Uderzo's Asterix and Caesar's
Gift. Tremensdelirious sings these lines on being served with
the alcohol of his choice. But what about Delhi? Are all concerned
parties happy with the government's excise policy?
The Delhi government issues manufacturers an L-1/L-1A license every
year on the fulfillment of some criteria. An L-1 is issued to an
Indian made Foreign Liquor (IMFL), which is given an approval certificate
on meeting a minimum sales figure target, which applies to all of
India except Delhi. It is also required to undergo quality checks.
An L-1A license is issued to country liquor manufacturers who have
to undergo quality checks that are carried out by the government
laboratories. IMFL brands are sold by government retail outlets,
which have L-2 licenses, like the Delhi Tourism and Transport Development
Corporation (DTTDC), the Delhi State Industrial Development Corporation
(DSIDC), the Delhi State Civil Supply Corporation (DSCSC), and the
DCCWS (expansion unknown) which run various outlets. While country
liquor is sold in Government shops that are issued L-10 licenses
sell. These shops also sell cheap IMFL, priced below Rs. 90.
The L-1 licences are given to a company, society, or manufacturing
firm: partnership or proprietorship firm provided the applicant
owns a distillery. The applications for this are invited through
advertisements in leading newspapers. The prime job of L-1 license
holders is to supply liquor to other license holders.
A number of certificates need to be submitted along
with an L-1 license application. These are listed below:
- Solvency certificate from SMD
- Income tax clearance certificate
- No dues certificate from collector (excise)
- No dues certificate from sales tax officer
- Declaration of distillery on affidavit regarding sale and minimum
ex-distillery prices and distance of distillery from Delhi
- CA certificate for sale and minimum ex-distillery prices
- Certificate from Excise authority regarding sale figures
- Registered partnership deed/memorandum and article of association
- Duly audited annual account and balance sheet of distillery
- Attested copy of the license for establishment of distillery/winery/bottling
- Power of attorney
- Attested photocopies of export passes/EVCs verifying the sale
figures of the whisky and rum brand for which distillery has applied
- Trade Mark Certificate (TMC)
- Usership agreement under Trade & merchandise Marks Act,
- Certificate from a government authorised laboratory or other
reputed private institution regarding quality of brand.
- An affidavit stating that there is nothing adverse or against
the applicant in view of the provision of rule 7 of Delhi Intoxicants
license and sale rule, 1976
- Documentary evidence to prove that the alcohol is manufactured
from natural alcohol (double distilled) Extra natural alcohol
The IMFL or the beer brand proposed to be sold by the applicant
of the L-1 license should be owned by the distillery and in respect
of the IMFL brands, excluding wine, the applicant should be in possession
of trade mark certificate in respect to these brands. However
if the brand has been sold in Delhi before 1993-94 the TMC is not
required. For the approval of rum and whiskey brands, the brand
must have sold a minimum quantity in the all India market excluding
Delhi as indicated in the terms and conditions.
Once the license is approved, the applicant has
to submit the following:
- Registration of brands
- Approval of bonded warehouse
- Approval of label
- Fixation of ex-distillery prices
Distilleries and breweries also have a bone of
contention with the liquor policy of the government. According to
the Constitution of India, under Article 47, it is
"Duty of the state to raise the level of nutrition and
the standard of living and to improve public health--the state shall
regard the raising of the level of nutrition and the standard of
living of its people and the improvement of public health as among
its primary duties and in particular, the state shall endeavour
to bring about prohibition of the consumption except for medical
purposes of intoxicating drinks and drugs which are injurious to
However experience of prohibition in other countries has shown
that the prohibition would be counter productive. Therefore, the
Delhi government grants a privilege to the distilleries with regulations,
without granting any right to trade in liquor.
L-2 licenses are given to only select undertakings of the Delhi
government namely DTTDC, DSIDC, DSCSC, and DCCWS. The proposal for
opening a vend has to come from these corporations. Individuals
wanting to rent out their premises for such a vend have to approach
these institutions, which after looking at the suitability of the
premises approach the relevant offices for the grant of the license.
The premise is required meet the following specifications:
- The premise should be a pucca building with a minimum
floor area of 400 sqft and located in a commercial area
- The area MLA should give his positive opinion on the matter.
- The Collector of excise, the DEO, and the representative of
the corporations and the area SMD have to inspect the premises.
- The shop shall not be within 75m of the following
- Industrial estate or any construction site
- Major educational institution
- Religious place
- Hospitals and nursing homes with more than twenty five beds
- Colonies of labourers and harijans
The permission of the area's MLA is a must. If approval is not
given, then a retail outlet cannot be opened. For instance, in Vasant
Kunj, there is not a single alcohol retail outlet, due to the negative
opinion of the MLA of the area.
If all these qualifications are met by the proposed premise, then
the license is given and the concerned party is required to deposit
an amount of Rs. 60,000 as the license fees. IMFL/beer brands are
sold by these vends at rates fixed by the excise commissioner. In
the year 1999-2000, there were 224 L-2 license holders.
L-3, L-5 licenses are given to hotels, which are
approved by the Department of Tourism and are categorised as Budget
hotels. The approval of the department of tourism is necessary for
the grant of an L-3 license. This license is for the sale of liquor
to its residents.
These hotels can also apply for an L-5 license
for serving of liquor in exclusive bars and in the restaurant in
the hotel premises. The following need to be submitted with
the application of an L-5 license:
- Documentary proof regarding legal status of the hotel
- Whether the hotel is in legal possession of the plot.
- Completion certificate in respect of the hotel building.
- Trade license from the Local authority (MCD/NDMC)
- Lodging house license from the local authority
- Certificate of registration of eating house license issued by
- Documentary proof regarding applicant being an income tax assessee
and sales tax assessee.
- A layout plan of the hotel, site plan of the license outlet
and the liquor stores.
The application is to be submitted to the Commissioner of Excise.
After scrutiny of the documents, the premises are inspected by the
excise officer as under the excise rules, particularly rule 11 of
the Delhi Intoxicants License and Sales Rule, 1976. The premises
should not be within 75m of any of the institutions as were
listed in the case of L-2 licenses.
Once the hotel has been found to be suitable, the views of the
public/residents are invited on the proposal giving 7 days time
to file objections before the licensing authority. If no objection
is received then the authorities proceed with the approval for grant
of license. An L-5 license is given only with an L-3 license and
the same requirements apply to an L-5 license. The total number
of L-3/L-5 licenses given in 1999-2000 was 42.
An L-4 license is given to an independent restaurant approved by
the Department of Tourism. Applications are submitted to the Commissioner
of excise with the relevant documents. The restaurant should be
located in a commercial area with adequate parking space. The requirements
of rule 11 of Delhi Intoxicants License & Sales Rules 1976 have
to be met by the restaurant. The requirements and procedure are
the same as in the case of L-3 and L-5 licenses. The total number
of L-4 licenses given in 1999-2000 was 81.
L-19 licenses are given for the service of liquor in a club registered
under the Societies Act 1860.The applicant is required to submit
on the letterhead of the club an application along with the following
- Registration certificate in respect of the club
- Documentary proof in support of legal possession of the plot
of the club.
- No objection certificate from the area DCP
- List of members of the club
- List of office bearers of the club
- Registration passed by the management Committee to start the
bar facility in the club and also to meet the liability thereof.
Rest of the procedure with regard to the grant of license is the
same as indicated in respect of L-3/L-5 license.
Liquor, being an excisable article, can not be stored beyond a
certain limit. A consumer is allowed to store a maximum of 20 litres.
For higher possession, an application to the department and the
payment of Rs. 2000 would get the applicant an L-49 license. The
applicant has to be an income tax assessee to be eligible for the
permit. The total number of L-49 licenses given in 1999-2000 was
Status of alcohol industry in India
The alcohol industry is very important for the government. It generates
an estimated Rs. 16,000 crore per annum in spite of the fact that
the per capita consumption of liquor in India is the lowest in the
world. The total liquor industry is worth Rs. 2,000 crore. IMFL
accounts for only a third of the total liquor consumption in India.
Most IMFLs are cheap and are priced below Rs. 200 per bottle. Alcohol
sales proceeds account for 45%of the total revenue collection in
the country. Whiskey accounts for 60% of the liquor sales while
rum; brandy and vodka account for 17%, 18% and 6% respectively.
MNC's share is only 10% and they have been successful only in the
premium and super premium ranges.
Post WTO the government may have opened India to foreign distilleries,
but the duty has been increased from 222% to 464-706%. This is due
to the fact that there is a 100% customs duty, 150% contravening
duty, local taxes, distributor's margin, retailer's margin and publicity
charges. The cost is finally borne by the consumer. Though the government
claims that this is being done to protect the domestic liquor industry,
the domestic industry accounts for 99% of the market share. This
protectionist policy could prove to be counterproductive and lead
to smuggling. As of now, only 45% of the sales are through legal
channels and only 25% of this is duty paid for.
Within India itself, the policy of alcohol retail differs from
state to state. While some states like Maharashtra, Uttar Pradesh,
and Tamil Nadu have a liberal policy, some states like Haryana and
Andhra Pradesh have had very bitter experiences in trying to make
these states dry and have eventually had to withdraw the policy.
Method of ordering
The L-2 licensed authorities on the basis of the price of the alcohol
place the orders for IMFL. For liquor priced below Rs. 90, the order
is equally distributed among all those manufacturers who have been
licensed in this category. For the alcohol priced between Rs. 91
and Rs. 205, the order is distributed among the L-1 holders in this
category depending on the production capacity of the brewery. For
the premium brands (above Rs. 205) the orders are placed by the
individual vends themselves. Any stock of liquor lying unsold in
a branch of an outlet is transferred to another shop of the same
chain. When stocks pile up, a committee is appointed to look into
the disposal of the stock of liquor. On a visit to a shop run by
the DSIDC in Saket on July 1, 2001, about 15 whiskey, 14 rum brands
and 15 beer brands in the under Rs. 90 category, and about 30 brands
of alcohol (whiskey, gin, vodka, rum) in the Rs. 91- Rs. 205 category
were displayed on their board of products with their prices. However,
there was no beer available in this shop and only about 5 rum brands
were stocked in the shop.
The sales figures of alcohol over the various years for
entire Delhi is given below:
||Sale of beer in bottles
||Sale of IMFL
||Sale of country liquor
||Sale of beer in bottles
||Sale of IMFL
||Sale of country liquor
Source: delhigovt.nic.in website
(The sale of liquor did not have any units)
The revenue growth of the excise department is tabulated
Revenue (Rs. crore)
Revenue (Rs. crore)
Source: delhigovt.nic.in website
In 1996-97, till October, the total revenue collected by the Delhi
government was Rs. 1429 crore. The excise contribution was Rs. 347.87
crore (24.34%). The cost of collection incurred by the department
was 0.4 crore (2% of the revenue). (All these figures are according
to the report on the delhigovt.nic.in website.)
As can be seen from the sales figures, there is a lot of fluctuation
in the quantities sold every year. When asked about this, the relevant
authorities refused to comment.
Area of objection
The Delhi government is the sole buyer and seller of alcohol in
Delhi. There was Rs. 4 crore worth of liquor of inferior quality
lying in the government retail outlets, according to a report in
the Times of India dated May 29, 2001. What is meant by inferior
quality liquor is something no one knows. On asking, the concerned
officials in the DTTDC head office in Lakshmi Nagar said that the
liquor was just unsold stock.
The government's excise policy is subject to a lot of sudden changes.
The manufacturers sometimes just need to get their L-1 licenses
renewed and at times they need to apply afresh, like in the year
2001. In 1993, the L-1 license holders were allowed to set up 5
'dedicated' shops in Delhi in which they could sell their approved
brands in addition to having them sold in the government retail
shops. The policy was withdrawn in an ad-hoc manner in 1994. On
being questioned about the effects of this policy, an official in
one of the country's leading breweries said that the introduction
of this policy had led to an increase in their revenue by almost
30% which they have lost out on since the policy got crushed. Recently,
the government's policy to open up 45 private liquor shops was quashed
by the cabinet, because it meant that the MLA's power in the issue
of a no-objection certificate for the setting up of a retail outlet
would be questioned. Had this policy been implemented, the government
would have earned Rs. 7.5 lakhs on each vend as license fees annually.
So, are all the concerned parties satisfied? Apparently not. Customers
often complain that they buy the alcohol that is made
available to them and that the brand of their choice is difficult
to get. Sometimes the scarcity is real, at other times it may be
a case of "brand pushing". (The market rate for brand
pushing starts at Rs. 30 per case.) Brand pushing depends on which
company is willing to pay more commission to the man who is at the
outlet of the government liquor vend. For example, a cheap whiskey
may carry a commission of Rs. 30 per case while a premium brand
may carry Rs. 60 per case. Though some officials of certain firms
admitted to the practice of brand pushing, the DSIDC officials vehemently
denied this practice.) Lines are long, stocks inadequate, and the
service leaves a lot to be desired. More vends; particularly private
ones would be welcome by the customers. The manufacturers would
definitely welcome a change in the excise policy, not just in terms
of licensing but also in terms of retail. It would mean a cleaner
and clearer system and would eliminate the monopolistic and monopsonistic
power of the government (the cost of which in 2001 was Rs. 4 crore
of unsold liquor lying in government retail outlets) by bringing
in efficiency through competition. The government would definitely
not be worse off with the introduction of private stores. In fact,
more revenue, in the form of license fees as well as in the form
of taxes that would accrue to the government from these vends. The
net alcohol consumption would also not increase. There would be
just a change in the buying pattern of the people. Instead of stocking
liquor as people do now, the same alcohol would be bought over a
period of time in smaller amounts. Studies conducted by the Fraser
Institute of Canada in Alberta, a place where alcohol is sold privately,
have shown that privatization of liquor retail has not lead to an
increase in consumption or any increase in crime.
The only party that would be worse off would be the people who
have made this policy--namely the people who are benefiting from
the current policy. Whatever benefits they are accruing now would
decrease, perhaps even be eliminated. But it would mean a big step
towards consumer satisfaction. In any case, dont we all believe
in the greatest good of the greatest number?
- Excise link on the Delhi government website located at delhigovt.nic.in
- Ajay Jain, Accounts officer, DTTDC
- Shivani Singh, Staff reporter, Times of India
- R P Singh, Area manager, United Breweries
- Shivani Singh, "Saathi's Plan to Privatise Liquor Vends
Scrapped", Times of India, May 29, 2001