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

Chapter-III
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revenue model for this basic infrastructure is always not practical.
However, conscious efforts are made to encourage self-sustainability of
projects through revenue generation in projects like subscription model
for libraries, Public Bicycle Sharing (PBS), entry fee for parks,
monetising advertisement tax through digital display boards, parking fees,
Multi Utility Facility Centres (MUFCs)/markets, OFC ducts etc.
The reply confirms the fact that the above projects in the SCPs could not
be successfully converted into revenue generating models.
• The SCPs had made provision for ₹5,008 crore to be pooled out of
convergence with various central and state schemes. However, there was
no financial convergence (inflow/outflow of funds) in respect of 226 out
of 237 projects taken up under the convergence mode. The SPVs did not
have any role in implementation or monitoring of these projects and the
records related to implementing these projects were not available with
them. This was in contravention of the approved SCP and Mission
guidelines which outlined the convergence agenda with other
missions/schemes as one of the key functions and responsibilities of the
SPVs.
The State Government replied (April 2025) that seven cities put together
had taken up 251 works of ₹6,814.10 crore, under convergence out of
which 232 works of ₹3,822.49 crore are completed and 19 works of
₹2,991.61 crore are in progress.
Recommendation 1: The Smart cities need to tap resources other than
Government grants like municipal bonds, pooled finance mechanism etc., for
long-term sustainability of the projects taken up.
3.3 Non-remittance of interest of ₹2.69 crore earned on Centrally
Sponsored Scheme (CSS) grant
KUIDFC (SLNA) operated an account exclusively for ‘Smart City Mission’ for
transactions relating to funds released by the GoI and GoK. Further, the funds
to SPVs and implementing agencies were released from this account.
Rule 230 (8) of GFR-2017 stipulates that all interests or other earnings against
Grants in aid or advances (other than reimbursement) released to any Grantee
institution should be mandatorily remitted to the Consolidated Fund of India
immediately after finalisation of the accounts. As per OM dated 30 June 2021
issued by the Ministry of Finance (Department of Expenditure), GoI, State
Nodal Agency/Single Nodal Agency (SNA) of each CSS in the State shall
compute the total interest earned out of the funds received in its account (both
from the Central Government and the State Government) in the preceding
financial year in the first week of April each year. The interest earned will be
apportioned by the SNA between the Central and the State Government as per
the approved funding pattern of the CSS and shall be deposited in the respective
Consolidated Funds.
Review of records showed that funds received from GoI and GoK were kept in
flexi deposits for time to time during 2015-16 to June 2024, which earned an
interest of ₹2.69 crore but was not remitted to respective Consolidated funds.