CAG Report No. 11 of 2025 — Implementation of Smart City Mission, Government of Karnataka

Planning
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2.3 Inclusion of projects outside Area Based Development areas:
As per the MoHUA advisory, adding projects outside the ABD area was not
permissible, unless the purpose of the work was for first-mile/last-mile
connectivity. viz., stormwater drainage, water supply, electricity, etc. However,
the connectivity portion of such projects cannot be a significant part of the
project cost. The Smart City Mission is a Centrally Sponsored Scheme where
the Central Government provides ₹100 crore per city annually for five years,
with an equal matching contribution from the State/ULB. This results in a total
funding of ₹1000 crore per city.
Audit observed that in five smart cities (out of seven) as against ₹4,048.33 crore
allocated for ABD projects, the actual cost of ABD projects implemented was
only ₹3,262.76 crore. However, in these cities, as against ₹817.42 crore
allocation under Pan City, projects were taken up for ₹1,462.67 crore indicating
diversion from ABD to Pan City interventions. City-wise details as of June
2024 are given in Table 2.4.
Table 2.4: Details of ABD/Pan City wise projectivisation
(₹ in crore)
Sl.
No
Name of the city Mission Funds allocated in SCP
for
Cost of projects implemented
ABD projects PAN City
projects
ABD PAN City
1 Davanagere 670.34 301.16 362.86 425.28
2 Hubballi-Dharwad 919.00 81.00 698.12 390.16
3 Mangaluru 787.38 184.17 573.49 348.27
4 Shivamogga 882.61 39.09 841.29 89.06
5 Tumakuru 789.00 212.00 787.00 210.00
Total 4,048.33 817.42 3,262.76 1,462.77
Source: Information furnished by KUIDFC/smart cities
The diversion of funds allocated for ABD projects to Pan City projects, resulted
in the non-implementation of projects in ABD areas viz., retrofitting, re-
development and greenfield development undermining the objective of
sustainable and inclusive development of compact areas.
The State Government replied (April 2025) that the rationale for including Pan
City projects was to ensure that the benefits of the Mission reached all citizens
and not just to those residing in the ABD areas. Further it stated that as on
January 2025 ABD projects worth of ₹3,854.97 crore and Pan city projects
worth of ₹1,742.31 crore have been executed.
The reply confirms the fact of diversion of funds from ABD to Pan city
interventions defeating the objective of creation of replicable model through
development of compact areas.
2.4 Transport and Mobility
Under transport and mobility, the selected cities were aimed to improve the
overall mobility, addend walkability in the area through carriageway
improvement, utility infrastructure, central and city bus terminal improvement,
flyover, underpass, road junction improvement, smart parking, cycle tracks and