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Karnataka lost substantial excise revenues in conversion of rectified spirit to portable alcohol, according to the Comptroller and Auditor General of India (CAG) in its revenue sector audit for year ended March 2017.
The CAG pointed out that a margin of about 2.19 crore to 4.23 crore bulk litres of rectified spirit which works out to tax revenue ranging between ₹633.32 crore and ₹1,222.62 crore, if converted into potable alcohol.
Wrong calculations
The report said the norms prescribed by the department did not factor in technological advancements and efficiencies designed for the fermentation plants. Consequently, the targets of production fixed were much lower than the actual potential of the distilleries. This in turn provided enough ‘margin’ to the distillers to work to their advantage to make additional yields of rectified spirits.
Liquor bottles with invalid excise adhesive labels were channelised by M/s Karnataka State Beverages Corporation Ltd (KSBCL), since the database relating to excise adhesive labels issued by Marketing Communication and Advertising Ltd (MCAL) was not interlinked with the data base of KSBCL. The CAG further said a technical committee recommended revision of norms for yield of rectified spirits in distilleries during October 2007 which was not implemented.
Revision of norms
The government implemented revision of norms from October 2015 after a lapse of eight years, based on the report by a second committee constituted in April 2011. An analysis of the yield in 12 distilleries for the period April 2012 to September 2015 pointed towards potential loss of Rs 64.84 crore of revenue to government due to delay in revision of norms.
Talking about deficient performance of distillery officers led to control lapse which resulted in: non accounting of 19,555 mt of molasses purchased by three distilleries in the state between May 2012 and April 2014 with minimum revenue impact of Rs 124.97 crore.
Samples of molasses drawn for chemical analysis were abysmally low which prevented the department in estimating actual output of rectified spirits. Excess storage loss claimed by four distilleries for the period from April 2012 to March 2017 worked out to 1,119.241 MT on which penalty of ₹7.60 crore was not levied.
Violations of licence conditions and the sale of portable liquor by non-licensees were substantial and the enforcement action of the department did not seem effective enough to control such illegal activities. It was noticed that 83 to 100 per cent of the licensees had violated the licence conditions and 80 per cent had repeated the same offences.
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