Bengaluru: Fresh allegations of commission demands have surfaced in the implementation of the Mahatma Gandhi Nagar Vikas Yojana–1, with contractors claiming that intermediaries are seeking 12 to 13 percent kickbacks to facilitate the release of long-pending dues running into crores of rupees. The issue has gained renewed attention after multiple contractors approached courts for payment, even as the Urban Development Department faces criticism for delays despite judicial directions.
According to documents and complaints submitted by the Karnataka State Contractors’ Association, several contractors who executed works under the scheme have alleged that middlemen are contacting them over the phone, promising to expedite payments in exchange for hefty commissions. The association claims that at least 30 contractors have filed written complaints detailing such demands.
The controversy comes at a time when the state government had released ₹200 crore on March 27, 2026, towards clearing pending dues under the scheme. However, contractors allege that instead of smooth disbursal, the release of funds has triggered a parallel network of intermediaries attempting to extract commissions.
Earlier, the Contractors’ Association had publicly raised the issue, accusing officials and intermediaries of corruption. The allegations were categorically denied by Chief Minister Siddaramaiah, Deputy Chief Minister D.K. Shivakumar, and Urban Development Minister Byrathi Suresh. Despite these denials, a fresh letter dated April 1, 2026, written by the association to the minister has provided fresh ammunition to the opposition.
In the letter, Association President R. Manjunath reiterated that contractors are being pressured to pay commissions to secure release of their legitimate dues. He urged the government to ensure that payments are made strictly based on seniority and completion status, without any scope for middlemen. He also demanded an urgent बैठक with department officials to address the grievances.
The Mahatma Gandhi Nagar Vikas Yojana was launched in 2019–20 with an outlay of ₹1,325 crore for infrastructure development across ten municipal corporations in Karnataka, including Mysuru, Kalaburagi, Hubballi-Dharwad, Mangaluru, Belagavi, Davanagere, Ballari, Vijayapura, Tumakuru, and Shivamogga. The scheme was designed to be funded equally by state grants and loans mobilised through financial institutions.
While the state government released its share of ₹662.50 crore, the remaining portion was to be raised through loans. However, complications in loan disbursal—particularly constraints under RBI guidelines—led to delays in fund mobilisation. As a result, many projects faced financial bottlenecks. By January 2025, a total of 728 works had been approved under the scheme, of which 347 were completed and 381 remained in progress. Despite significant progress on the ground, contractors have been struggling to receive payments, leading to mounting financial stress and legal battles.
Officials had earlier indicated that an additional ₹658.22 crore was required to clear pending liabilities, and proposals were sent to the government for allocation in the 2024–25 budget. However, delays persisted, with several municipal corporations continuing to report outstanding dues. Data shows that substantial amounts remained unpaid across cities, including Mangaluru, Hubballi-Dharwad, Kalaburagi and Ballari. Municipal bodies have repeatedly requested the Directorate of Municipal Administration to release funds, citing pressure from contractors and stalled works.
One such case involves a Mangaluru-based contractor, Anwar Sadath, who approached the High Court seeking payment of ₹9.50 crore in pending dues. The court, in its July 16, 2025 order, directed the government to clear the payment within three months. However, the amount reportedly remained unpaid, prompting the contractor to file a contempt petition.
The Urban Development Department had sought the opinion of the Finance Department on the matter, which advised against releasing funds without considering factors such as project seniority, availability of funds, and allocation priorities. It also suggested filing an appeal against the court order. Despite multiple representations by the contractor and communications from the Mangaluru City Corporation, the dues have not been cleared. The contempt petition is scheduled for hearing on April 9, 2026.
