AP Liquor Fraud: ED Grills Ex-IAS Officer in ₹3,500 Crore Scam Probe

The high-profile investigation into Andhra Pradesh’s liquor trade has intensified. On Monday, March 9, 2026, the Enforcement Directorate (ED) summoned and questioned four key individuals, including retired IAS officer K Dhanunjay Reddy, in connection with a suspected ₹3,500 crore fraud. The probe centers on allegations that the previous state government (2019–2024) systematically altered liquor policies to favor specific manufacturers in exchange for massive kickbacks.

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As the central agency untangles a web of shell companies and diverted funds, the focus has shifted to the inner circle of the former Chief Minister’s Office (CMO), marking a significant escalation in the ongoing money-laundering case.

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The Vijayawada Grilling: Who was Questioned?

The ED’s Vijayawada office saw a series of intense interrogation sessions on Monday.

• K Dhanunjay Reddy: Retired IAS and former Additional Secretary in the CMO.

• P Krishna Mohan Reddy: Former Officer on Special Duty (OSD) to Y.S. Jagan Mohan Reddy.

• The Aides: Cherukuru Venkatesh Naidu (aide to former MLA Bhaskar Reddy) and Booneti Chanakya (relative of accused No. 1, Raj Kesireddy).

• The Session: While Krishna Mohan Reddy was released after two hours, the remaining three were questioned until late evening.

Policy Manipulation: The ₹3,500 Crore “Kickback” Engine

The core of the ED’s case rests on how the state’s liquor policy was allegedly “weaponized.”

• Restrictive Licensing: Investigators allege the policy was tweaked to ensure only manufacturers who paid “hefty kickbacks” could secure supply contracts.

• Revenue Loss: The preliminary assessment suggests these irregularities drained nearly ₹3,500 crore from the public exchequer.

• The “Compelled” Payments: Distilleries were reportedly forced to pay over ₹1,048 crore in cash and gold to maintain operations.

Asset Attachment: ₹441 Crore Frozen under PMLA

Last Friday, the ED moved to freeze the wealth of the key accused.

• The Seizure: Assets worth ₹441.61 crore—including land parcels, fixed deposits, and bank balances—were attached.

• Key Targets: This includes properties belonging to Raj Kesireddy and D Vasudeva Reddy, the former Managing Director of AP State Beverages Corporation Ltd (APSBCL).

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The Shell Company Network

The financial trail suggests a sophisticated laundering operation.

• Routing Funds: Kickbacks were allegedly funneled through a network of shell companies to hide their origin.

• Document Trail: The ED has now demanded bank statements, PAN details, and asset records for family members of the accused to trace the final destination of the diverted ₹1,000+ crore.

Reality Check

The AP liquor scam mirrors the complexity of the Delhi Excise case, but with a focus on manufacturing control rather than just retail licensing. Still, the transition of power in the state has accelerated the “discovery” of these alleged files. Therefore, while the ED points to a ₹3,500 crore loss, the defense is likely to argue that the policy changes were “sovereign decisions” intended to centralize trade for better regulation. In fact, the sheer volume of attached assets (₹441 crore) suggests the ED has found significant “proceeds of crime” early in the probe.

The Loopholes

The ED says policy was altered for kickbacks. In fact, this is a “Policy Discretion Loophole”—governments have the right to change excise rules, and proving that a specific change was made solely for a bribe is legally difficult without “smoking gun” communication. Therefore, the ED is relying heavily on the testimony of distillery owners who claim they were “compelled” to pay. Still, the “Shell Company Loophole” remains; if the money was laundered through offshore entities or untraceable cash-to-gold conversions, proving the link to the ex-IAS officer’s personal accounts will be the agency’s biggest hurdle.

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What This Means for You

If you are a taxpayer in Andhra Pradesh, understand that this “loss” directly impacts state welfare funds. First, realize that ₹3,500 crore is a significant portion of the state’s potential revenue for infrastructure or education. Then, if you follow state politics, understand that the bureaucratic circle is now under fire; the questioning of a retired IAS officer signals that “administrative immunity” is being bypassed in this corruption probe.

Finally, understand that liquor prices and brands in AP might see another shift. You should expect a more transparent tender process in the coming months as the current government attempts to “clean” the system. Before drawing final conclusions, wait for the ED’s formal charge sheet, which will detail the exact role of each CMO official.

What’s Next

The ED has directed the four accused to appear for a second round of questioning later this week with additional documents. Then, look for the interrogation of D Vasudeva Reddy, whose role as the head of the Beverages Corporation is seen as pivotal. Finally, expect the state CID to file supplementary FIRs as more distillery owners come forward to record their statements.

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