YSRCP MP Peddireddy Midhun Reddy has been arrested by the Andhra Pradesh Special Investigation Team (SIT) in connection with a ₹3,200 crore liquor scam that allegedly occurred during the previous YSR Congress Party (YSRCP) regime. The arrest followed an extensive questioning session lasting nearly seven hours at the Crime Investigation Department (CID) office in Mangalagiri. A Vijayawada court has remanded Midhun Reddy to judicial custody until August 1. He will be shifted to Rajahmundry Central Jail.

The SIT's investigation revealed alleged manipulation of excise policies to favor certain liquor companies in exchange for kickbacks. According to a complaint filed by Y Venkateswar Rao Srinivas, irregularities occurred in the Andhra Pradesh State Beverages Corporation Limited (APSBCL) between October 2019 and March 2024. The complaint alleges that purchase orders were made for new and spurious liquor brands, some produced by private distilleries with YSRCP leaders as partners, and that kickbacks were paid for not purchasing stock from popular brands.

Midhun Reddy is accused No. 4 in the case, which the SIT says pertains to the liquor policy of the previous YSRCP government in Andhra Pradesh, allegedly designed to benefit specific local liquor brands. Police have accused YSRCP leaders and bureaucrats of replacing popular liquor brands with lesser-known brands in exchange for bribes amounting to ₹3,200 crore. According to his arrest notice, Reddy is a "core conspirator from inception to execution, orchestrating policy changes and coordinating with co-accused to secure kickbacks from distilleries and suppliers".

The chargesheet alleges that former Andhra Pradesh Chief Minister YS Jagan Mohan Reddy received ₹50-60 crore every month during the YSRCP's 2019-2024 rule. While the chargesheet does not name Jagan Mohan Reddy as an accused, it states that collected funds were given to Kesireddy Rajasekhar Reddy, who then passed the money to Vijay Sai Reddy, Midhun Reddy, and Balaji, who would transfer it to the former Chief Minister. The report identifies Rajasekhar Reddy as the "mastermind and co-conspirator" behind the liquor scam, accusing him of manipulating excise policy, replacing automated Order for Supply (OFS) systems with manual processes, and appointing loyalists in APSBCL. It is alleged that ₹250–300 crore was routed in cash for YSRCP election expenses, coordinated by Rajasekhar Reddy and ex-MLA Chevireddy Bhaskar Reddy, and that laundered money was invested in land, gold, and luxury assets in Dubai and Africa via over 30 shell companies.

The Enforcement Directorate (ED) had registered a money laundering case under the Prevention of Money Laundering Act (PMLA) earlier in May to investigate the alleged financial crimes. The SIT has filed a preliminary chargesheet in the liquor scam before the Vijayawada court, consisting of a 300-page document supplemented by over 100 forensic lab reports and several electronic devices. The SIT has seized assets worth ₹62 crore, examined 268 witnesses, and recorded the statements of 11 individuals.

BJP's Andhra Pradesh spokesperson Sadineni Yamini Sharma welcomed the arrest, stating that Midhun Reddy manipulated the state's liquor policy, altered the automatic order placement system, and collected kickbacks, funneling funds through shell companies. She said the arrest demonstrates the accountability, transparency, and commitment of the current government, and that it shows there is no political vendetta.

The YSRCP has condemned the arrest, calling it a political conspiracy and an attempt to suppress dissent, asserting that the liquor policy during their governance was transparent and managed directly by the state. They claim that the number of liquor shops was reduced, and belt shops and permit rooms were removed. The party alleges that the current government is engaging in vindictive behavior and fabricating cases based on forced confessions. The YSRCP also stated that the current government led by Naidu “committed several irregularities in liquor sales”.