CAG finds SPVs mobilized negligible non-grant funds in Karnataka Smart City Mission

Who it concerns: Government of Karnataka, State Level Nodal Agency (SLNA), and the Special Purpose Vehicles (SPVs) established for the seven selected smart cities.

What the auditor found

• Only 68 out of 135 specified goals were achieved; 160 out of 544 planned projects (30%) were dropped contrary to MoHUA instructions.
• Projects worth ₹1,462.67 crore were taken up against an allocation of ₹817.42 crore under Pan City development.
• ₹2.69 crore interest earned on Central Sponsored Scheme grants was not remitted to the concerned government accounts.
• ₹2.56 crore excess payment was made to the Project Management Consultant (PMC) due to inadequate verification.
• ₹0.75 crore was spent by the SLNA on activities unrelated to the Smart City project.
• Four SPVs failed to maintain the minimum paid-up capital of ₹200 crore, with actual capital standing at only ₹10 lakh each.
• Only 45 out of 645 projects were awarded within the stipulated time.
• The Centralised Data Centre project had a financial progress of only ₹19.08 crore against a contract value of ₹60.22 crore after five years.
• Infrastructure worth ₹62.60 crore in Hubballi-Dharwad (including hospital upgradation and market renovation) remained idle for more than two years.
• CAG recommended that SPVs tap non-government resources like municipal bonds, ensure full-time CEO appointments, and integrate all data centers into the Centralised Command and Control Centre.

Also in the document

• CAG found that the SPVs could mobilize very few financial resources from sources other than government grants, defeating the objective of their formation.
• CAG noted that the Integrated Command and Control Centre (ICCC) was sub-optimal because integration with line departments, police surveillance, and bus rapid transit systems was pending or failed due to poor coordination and non-readiness.
• CAG reported that utility ducts laid for water, gas, and electricity could not be utilized by respective departments due to technical mismatches (e.g., pressure ratings, missing valves) or lack of feasibility studies.
• CAG observed that the tender process for the ICCC project in Shivamogga was vitiated by tweaking conditions to select an ineligible Local System Integrator.