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

Chapter-III
22
3.5.3 Levy and collection of penalty
The service provider for Master System Integrator for the Integrated Command
and Control Centre (ICCC) facility was approved for an estimated cost of
₹101.30 crore. The work was awarded (March 2021) to M/s Fluentgrid Limited
for ₹95.99 crore, with a stipulation to complete the work in eight months i.e.,
November 2021. However, audit observed that due to various factors including
delays in finalizing the ICCC location, upgradation of works in eight zonal
centres of BBMP and delay in finalization of DPR, extension of time (EoT) was
granted four times from November 2021 to December 2023.
Despite these extensions, the agency failed to complete the project on time.
Based on the report of PMC (iDeCK), the Managing Director, Bengaluru Smart
City Limited communicated (January 2023) to the agency regarding levy of
penalty of ₹2.92 crore for the above delay in completion of works as per the
provisions outlined in the Contract Agreement Clause 51.2 of RFP Volume 3.
This clause specifies that a penalty of one per cent should be imposed for a
delay of one week and 1.5 per cent for delays exceeding one week, subject to a
maximum of seven per cent of the value of balance work. Further, the agency
submitted request to waive off the penalty and same was rejected by the Board
of Directors (29th Board meeting) of Bengaluru Smart City Limited (November
2023) and Managing Director, BenSCL was authorised to take necessary action
in this regard.
Additionally, the agency requested a further extension of time from 01 February
2023 to 31 March 2024. The Technical Committee recommended for levy of
nominal penalty of ₹2,000 per day and same was approved by the Board (March
2024) in its 30th Board meeting. However, the tender conditions clearly outlined
the rate of penalties for project delays, and there was no justification for levying
penalty at the rate of ₹2,000 per day without any price escalation, which led to
non-invoking of tender conditions.
Government in its reply stated that the penalty works out to ₹7.83 lakh.
However, the PMC considering delays in implementing the project had
recommended for levy of penalty of ₹2.92 crore. The reply is not acceptable as,
the Board though rejected the proposal of waiver of penalty, no action was taken
to collect the same. The details of total amount of penalty levied and collected
was not communicated to audit.
Recommendation 2: The Government should direct the SLNA to adhere to
guidelines issued in implementation of the scheme and remit the interest dues
to GoK/GoI accounts concerned. Further, the SPVs should invoke
contractual obligations on the agencies for deviations/delays in
implementation of the scheme.