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

Chapter-IV
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support beyond December 2026, in case of non-availability of support from the
OEM, MSI agreed to submit a declaration that the product will be replaced at
“no cost” to the Authority.
KMDS further notified that the MSI will replace such products and recover the
cost of such replacements from the payments to be made to the MSI and /or
from the performance Bank guarantee provided by the MSI for the project.
KMDS is expected to complete the project by March 2025. KMDS levied a
liquidated damages of ₹2.18 crore on MSI against the total payment of ₹17.08
crore.
The levy of liquidated damages confirms the fact that the performance of MSI
was not as per the contractual obligations, wherein, the ‘Go-Live’ was
scheduled for March 2025, which was far beyond the target date of September
2019. Despite incurring an expenditure of ₹19.08 crore, the platform remains
uninstalled, and the intended benefits have not been realized. Furthermore, the
absence of platform support for five years post 'Go-Live' poses significant risks
on the viability and security of the Smart City projects.
• Wasteful expenditure on procurement of GIS software
The scope of the ICCC included various smart solutions viz., Intelligent Traffic
Management System (ITMS), Intelligent Transport System (ITS), Solid waste
Management (SWM) system, smart water etc., which required real time
location-based GIS services. KUIDFC procured (March 2017) GIS license at a
cost of ₹3.99 crore for six smart cities29 to provide a common GIS-based city
operation platform in the ICCC.
Audit observed that the warranty of the procured license expired in March 2018
and the proposal to renew the same was deferred as ICCC projects were still at
tendering stage. The proposal for renewal of the expired license and software
development for existing GIS applications at a cost of ₹2.00 crore from the
original supplier was approved by the HPSC subsequently in September 2020.
Thus, the GIS license procured during March 2017 could not be utilized by the
smart cities rendering the expenditure of ₹3.99 crore wasteful.
The State Government replied (April 2025) that nodal agency had ensured
economy through early procurement of GIS licenses at DGS & D rate and their
renewal at competitive rates by directly negotiating with OEM. The reply was
not acceptable as the procurement of GIS licences (March 2017) before
completion of tendering and appointment of system integrators was
unwarranted, which resulted in wasteful expenditure of ₹3.99 crore.
4.6.1.3 Duplication of security infrastructure
As per the GoK guidelines for establishing Command-and-Control Centre,
smart cities should use security infrastructure such as firewall, intrusion
prevention system, antivirus, web application firewall, distributed denial of
services, security information and event management system and enterprise
management system provided at centralised data centre at KMDS. As per the
guidelines, the security infrastructure had been provisioned in the RFP of MSI
for establishment of Centralised Data Centre at KMDS.
29 Belagavi, Davanagere, Hubballi-Dharwad, Mangaluru, Shivamogga and Tumakuru.