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

Chapter-IV
24
Introduction
The structure and function of the SPVs as provided in the Mission guidelines
included the power to approve and sanction projects including their technical
appraisal so that SCPs could be executed with complete operational freedom.
The Articles of Association (AoA) and Memorandum of Association (MoA) of
the SPVs needed to incorporate the above provisions. MoHUA also issued
(January 2016) model AoA and MoA for the SPVs.
Further, the Mission Guidelines encouraged the State Government and the ULB
to adopt the following best practices to create empowered SPVs to the extent
and as provided under the Municipal Act.
➢ Delegating the rights and obligations of the Municipal Council with
respect to the Smart City project to the SPV.
➢ Delegating the decision-making powers available to the ULB under the
Municipal Act/Government Rules to the CEO of the SPV.
➢ Delegating the approval or decision-making powers available to the
Urban Development Department / Municipal Administration Department
to the Board of Directors of the SPV in which the State and ULB are
represented.
Audit findings
4.1 Non-contribution of minimum Paid-up Capital
As per Clause 10.4 of SCM guidelines, the paid-up capital of the SPV should
be ₹200 crore (₹100 crore of GoI contribution and ₹100 crore of State share).
The details of the authorized and paid-up share capital for the seven smart cities
are shown in Table 4.1.
Table 4.1: Details of authorised and paid-up share capital of the smart cities
Name of the
City
Round of
selection
Date of
incorporation
Size of the
project as
per SCP
(₹ in crore)
Authorised
share capital
(₹ in crore)
Paid up
capital
(₹ in crore)
Belagavi Round 1 11/05/2016 3,866.00 500 200
Davanagere Round 1 19/05/2016 1,307.18 500 200
Hubballi-
Dharwad
Round 2 10/03/2017 1,662.00 200 0.10
Shivamogga Round 2 07/02/2017 1,517.38 200 0.10
Mangaluru Round 2 06/04/2017 2,000.72 200 0.10
Tumakuru Round 2 06/02/2017 2,227.00 200 0.10
Bengaluru Round 3 03/01/2018 2,219.32 200 200
Source: Information furnished by Smart Cities
Review of incorporation of seven smart cities showed that two cities (i.e.
Belagavi and Davanagere) selected during Round-1 had an authorized capital
of ₹500 crore each. Another four cities (i.e. Hubballi-Dharwad, Shivamogga,
Mangaluru and Tumakuru) selected during Round-2 and Bengaluru selected in
Round-3 had authorized capital of ₹200 crore each.