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

Chapter-III
20
• Excess payment of ₹1.13 crore was made for two projects19 that had only
completed the design stage. As per the CA report, the projects were treated
as completed and full payments were made irregularly.
• Similarly excess payment of ₹0.71 crore was made in respect of two
projects20, the design phase of which were incomplete.
• MSCL appointed two new PMCs to implement waterfront development
and Smart Road projects and paid an amount of ₹0.72 crore for the design
phase of these works. This amounted to duplication as the erstwhile PMC
had already been paid for the design phase of these works.
Thus, inadequate verification in respect of payments made to the PMC resulted
in excess payment of ₹2.56 crore.
The State Government replied (April 2025) that the total payment to PMC is
based on manpower deployed for the period of actual deployment and the total
value of work executed during the deployment and was not dependent on the
presence of PMC during actual implementation or submission of design phase
reports. The reply is not acceptable as payment to PMC was to be regulated
based on the achievement of milestones prescribed in the contract agreement.
3.5.2 Irregular transfer of funds directly to departments
MoHUA instructed (January 2019) that in projects where the respective
departments / government agencies possessed strong technical expertise and
execution capabilities, they could be leveraged in executing those projects
faster. However, MoHUA had specified that there should not be any transfer of
funds directly from SPV to government department/agency. The payments
should be disbursed by the SPV to the contractor on completion of each
milestone as per the terms of the tender. The government department/ agency
was to check and verify the contractor’s bills for correctness and submit them
to SPV for payment. A tripartite agreement was to be entered between SPV, the
government department/agency and the prospective bidder before the execution
of such projects.
Audit noticed that an amount of ₹153.38 crore was transferred to the
departments/agencies in contravention of MoHUA instructions as detailed in
Table 3.3.
19 Development of MLCP with retail space near Hampanakatta junction, and Conversion of all
streetlights into solar LED.
20 Redevelopment of Central market and retrofit of fish market and Waterfront area
development.