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

Implementation of Projects and Monitoring
25
Audit observed that four of the sampled SPVs had not maintained the minimum
requirement as per SCM guidelines and the actual paid-up capital of each Smart
City stood only at ₹10 lakh. Due to non-contribution, Audit could not ensure
compliance to the provisions of the Companies Act 2013, applicable for
Corporate Governance viz., (i) non-creation of key managerial posts; (ii) Audit
Committee not formed; (iii) Infrastructure created not shown in the books of
accounts.
4.2 Non-appointment of Chief Executive Officer
As per Clause 10.1 of SCM Guidelines, every Smart City should have a SPV
and the SPV should have a full time Chief Executive Officer (CEO). Paragraph
3 to Annexure 5 of the SCM guidelines provides that the CEO shall be a member
of the Board of the SPV who is appointed with the approval of the MoHUA for
a fixed term of three years and can be removed only with their prior approval.
The appointment of CEO was emphasized in the Advisory Number 14 dated 03
October 2018 of MoHUA as it was observed that across organisations, having
a full time CEO facilitates quick decision making and better results in terms of
frequent board meetings and faster rate of project implementation in general.
Audit observed that the said guidelines has not been followed in respect of
appointment of CEOs and SPVs were not headed by full time CEOs as detailed
in Table 4.2.
Table 4.2: Non availability of CEO
Smart
City
Date of
Incorporation
Period of non-availability of CEO
From To Duration
BSCL 11-05-2016 11/05/2016 27/10/2016 5 months
20/04/2017 28/01/2019 1 year 9 months
BenSCL 03-01-2018 03/01/2018 21/08/2019 1 year 7 months
DSCL 19-05-2016 19/05/2016 01/03/2018 1 year 10 months
HDSCL 10-03-2017 10/03/2017 19/11/2018 1 year 8 months
MSCL 06-04-2017 06/04/2017 19/11/2018 1 year 7 months
20/10/2020 Till December -
2022 2 years 2 months
SSCL 07-02-2017 07.02.2017 03.03.2022 5 years
TSCL 06-02-2017 27.12.2017 04.12.2018 11 months
26.07.2019 30.06.2020 10 months
Source: Information furnished by Smart Cities
Due to absence of full time CEO, project implementation under SCM was
unable to gather momentum and the effort shifts from that of a Mission mode
to one of business as usual. Thus, that it would be difficult for one person to
discharge the duties of two posts viz., Commissioner of the ULB and Managing
Director/CEO of the SPV particularly when there is a conflict of interest in
discharging his duties between the SPV and the ULB.
The State Government replied (April 2025) that efforts were made to ensure
continuity of services of CEOs for implementing the projects and issues like
practical difficulties and administrative issues for the gaps. The fact remains