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

Chapter-IV
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that the CEOs were not available for most of the initial phases of
implementation of scheme ranging from 26 months to five years which was in
violation of the SCM guidelines and delayed the completion of projects.
4.3 Lack of Operational Independence
Paragraph 4 of Annexure 5 of SCM guidelines specifies that the primary reason
for creation of an SPV for SCM was to ensure operational independence and
autonomy in decision making and mission implementation. To enable the same,
SCM guidelines encourages the State Government and the ULBs to delegate:
(i)Rights and obligations of the municipal council with respect to the Smart City
project to the SPV, (ii) the decision-making powers available to the ULB to the
Chief Executive Officer of the SPV, (iii) the approval or decision making
powers available to the Municipal Administration department to the Board of
Directors of the SPV and (iv) the matters that require the approval of the State
Government to the State Level High Powered Steering Committee (HPSC) for
Smart Cities.
Audit scrutiny of the Memorandum of Association (MoA) and Articles of
Association (AoA) of the seven SPVs, revealed that except for Bengaluru, no
SPV was empowered to approve and sanction projects including technical
appraisal as prescribed in the Mission guidelines. Except for Bengaluru, the
MoA and AoA of other smart cities contained the clause ‘To get approval and
sanction of projects’ instead of ‘Approve and sanction projects’ as provided in
the model documents. Consequently, the full powers in respect of approval of
tender/variations and extension of time for projects were vested with HPSC.
Further, the prior approval of Technical Committee (TC), KUIDFC was to be
obtained for approval of variations. State Government granted SPVs full
powers in respect of extension of time and approval of variations only during
December 2022, which was withdrawn during July 2023 indicating retaining of
powers by the State Government instead of SPVs.
The State Government replied (April 2025) that the State Technical Committee
constituted at KUIDFC was scrutinising the DPRs and according approvals. The
reply is not acceptable for the reason that the delegation of powers to technical
committee was in contravention of the SCM guidelines.
4.4 Delay in awarding of projects
As per the project implementation timeline provided in the MoHUA Annual
Report, the award of works should be completed within 12 to 18 months of
incorporation of the SPVs. However, Audit observed that SPVs could award
only 45 out of 645 (seven per cent) projects within the stipulated timeline as
detailed in Table 4.3.