Fund-crunched BDA turns a charitable institution

CAG report says that the BDA did not care about renewing the ad contracts for five flyovers, or did not hand them over to BBMP.

The audit report by Comptroller Auditor General of India for the year ending March 2013 reveals that Bangalore Development Authority, which lacks funds for the development works it is supposed to undertake, donated Rs.10.19 crore for various purposes, including Chief Minister’s relief fund and flood relief fund by a TV channel.

An amount of Rs. 2 crore each was donated to Chief Ministers’ Relief fund and Bangalore Medical College and Research Institute, while the Institute of Nephro Urology and Karnataka Chalana Chitra Academy for Rs 1 crore each. Similarly Rs 5 to 10 lakh was donated to many institutions under the pretext of charitable activities, by the BDA.

The list of donations includes the amounts donated by the BDA to religious institutions, Kannada activism groups, for purchase of dialysis machines in hospitals, film festivals, organising dramas, purchase of APC truck for supply of LPG cylinders, sponsoring mountaineering, organising international conference on global communication etc. The list can be seen here.

‘BDA’s mandate is to develop the city’

CAG report on General and Social Sector for the year ended March 2013 presented in the Legislative assembly, pointed that Bangalore Development Authority (BDA) established under the BDA Act, 1976 (Act)  is empowered to acquire, hold, manage and dispose of moveable and immoveable property, to carry out building, engineering and other operations that necessary expedite development activities in the Bangalore Metropolitan Area.

Section 40 of the BDA Act allows establishment of Bangalore Development Fund. The money collected by BDA by way of rents, profits and sale proceeds of all lands or buildings, property tax and betterment taxes is to be credited to this fund.

The act allows the BDA to use this fund only for the works mandated in the act. This includes the development of the Bangalore Metropolitan Area, maintaining, lighting and cleaning the streets, maintaining drainage and sanitary arrangement and water supply.

The CAG notes that the BDA act has no provision for making any donations to any body/ authority for any purpose from this fund, and the donations by the BDA are in violation of the act.

‘BDA not a charitable institution’

When CAG officials sought explanation on the irregular donations which was not a mandate under theBDA Act, the Finance Member, BDA explained: “BDA undertook charitable activities which fell under the definition of relief of the poor in education, medical relief, preservation of environment, preservation of monuments or objects of artistic or historic interest or advancement of any object of public utility as defined under Section 2(15) Income Tax Act.”

The Finance Member added that while the donation to CM’s Relief Fund had been given for providing relief to the public, the other donations came under the scope of advancement of any object of public utility.

Section 2 (15) of the Income Tax Act defines ‘charitable purpose’ for the purpose of claiming exemption from tax. CAG pointed that BDA is neither a charitable institution nor it is authorised to undertake charitable activities as per the BDA Act.

Unsatisfied with the reply, the CAG referred this matter to the Government on May 2013. Until December 2013, the CAG did not receive any reply.

BDA incurring loss in ad contracts

Advertisements on flyovers/ grade separators usually become good source of revenue for local bodies like BBMP and BDA. But, if they remain unregulated, it results in loss of crores of rupees.

BDA built five flyover/grade separators in Anand Rao Circle, Dairy Circle, Hebbal, Jayadeva Institute of Cardiology and Whitefield, and invited tenders for advertising in December 2006 from advertising agencies and corporate bodies. According to the tender, it was the responsibility of the agency to develop and maintain the flyover and the landscape around it on the basis of Build Operate and Transfer (BOT) basis.

The advertising rights for four flyovers were given in April 2007 to an agency at Rs. 1.40 crore per annum, while the rights for White field flyover was awarded to another agency at Rs. 6 lakh per annum.

According to the agreements, the period of license was for five years with the condition that the license would be initially for one year, which would be reckoned from the 46th day of signing the agreement or from the date of completion of landscaping, whichever was earlier. The license was to be renewed after every 12 months.

At the end of license period, the agencies were supposed to hand over the entire area allotted to them in good, acceptable condition to BDA. The two agencies were to pay every year license fees aggregating 1.46 crore. The five-year period ended in March 2012.

CAG observed that BDA did not have the details of renewal of the agreements made during the five year period. The agency which got the license for the Whitefield flyover did not pay license fee amounting to Rs.30 lakh during the five year period. The agency which got the license for the other four flyovers paid only Rs. 2.79 crore as against Rs. 6.99 crore the five year period.

BDA fails to transfer documents to BBMP

Meanwhile, before the expiry of the five year period, BDA handed over three flyover to BBMP for maintenance. Anand Rao Circle was handed on 6 November 2009, Jayadeva Institute of Cardiology on 19 May 2010 and Dairy Circle on 9 March 2012.

CAG reported that even though the agreements with the agencies included a clause which mandated them to pay their license fee to BBMP, the agencies failed to do it. They even failed to remit the fee to BDA.

Only in December 2012, when BBMP realised the payment due from the agency, BBMP wrote to BDA informing that they have not been provided with the details of renewal of agreements in these cases.

Yet again, the BDA  failed to take action by getting the licenses renewed or cancelling the licences when the agencies had defaulted in payments. The BDA also failed to alert the BBMP about the contractual obligations in respect of the flyovers handed over to them for further maintenance. Instead of cancelling the licences of the defaulting agencies and allotting the advertising space to others, BDA neglected the matter till the expiry of the five year period, losing in the process a revenue of Rs 4.50 crore, says the CAG report.

The CAG did not receive any reply by the government in this case too.

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