On December 17, the Comptroller and Auditor General’s Performance Audit report that scrutinised in detail the flagship Pradhan Mantri Khanij Kshetra Kalyan Yojana was tabled in the Karnataka state assembly. This flagship scheme was designed as per the provisions of Mines and Minerals (Development and Regulation) (Amendment) Act, 2015; immediately after National Democratic Alliance government came into power in May 2014. The amendment to India’s framework law governing the mining sector was rooted in the belief that part of the royalty paid by mining leaseholders shall remain in the district to ensure the overall welfare of mining affected people. Thus, a specified percentage of mining royalty will remain at district-level District Mineral Fund to be managed by organisations named District Mineral Foundation Trusts. In September 2015, as per the provisions of MMDR (Amendment )Act, the Union ministry of mines issued guidelines for the implementation of what it termed the Pradhan Mantri Khanij Kshetra Kalyan Yojana. The objectives of PMKKKY are:To implement various developmental and welfare projects/ programmes in mining affected areas;To minimise/mitigate the adverse impacts, during and after mining, on the environment, health and socio-economics of people in mining districts; andTo ensure long-term sustainable livelihoods for the affected people in mining areas.This performance audit on PMKKKY implementation in Karnataka points out that as on March 31, 2023, the District Mineral Fund amounted to Rs 4003.51 crore; whereas expenditure had remained sluggish at Rs 1826.46 crore (i.e. 45.62%). However, as we analyze the audit findings, the message that emerges is not just sluggish expenditure, but also instances of works getting awarded without inviting tenders, as well as money getting spent to what auditors have termed as “irregular and inadmissible expenditure”.In a shocking audit finding, auditors reveal that authorities had not paid enough attention to planning processes, thereby defeating the participatory planning purpose that was at the heart of the PMKKKY. In test-checked districts, CAG found that DMFTs had not prepared any Master Plan or Vision Document for the activities to be taken up. While the PMKKKY Guidelines, model rules and Karnataka DMFT Rules provided for the very basic activity of preparing lists of mining affected people and mining affected villages in respective districts, after almost a decade of PMKKKY implementation, these basic lists were not prepared and were not found on records. In absence of such basic lists, the targeting of works under PMKKKY for mining affected villages and people remained an unachieved goal.The performance audit also revealed that monitoring and impact evaluation remained neglected tasks. CAG audit states: “[T]hough the State Level Steering Committee, headed by honorable Chief Minister, was constituted in March 2018, five years later, as on June 2023 no meeting were held”.As envisaged under Rule 5A of Karnataka DMFT Rules 2016, the SLSC shall meet at least once a year. The mechanism meant to ensure checks and balances has utterly failed, since the State-Level Empowered Committee, headed by Chief Secretary, whose prerogative was to ensure timely monitoring and review the progress of projects financed by DMFTs and functioning of DMFT Managing Committees, had met only four times between March 2018 and June 2023. As per Rule 5B of Karnataka DMFT Rules 2016, the SLEC shall meet at least three times in a year. Thus, against the mandatory minimum requirement of 15 meetings, the SLEC could meet only four times, exposing poor compliance.Similar shortfalls and non-compliance with basic planning and monitoring mechanism were noticed with regard to mandatory minimum requirement of meetings of DMFT Governing Councils and Managing Committees in test checked districts, as explained in the table below:Name of Test-Checked DistrictFrom Fiscal Year 2026-17 to 2022-23Number of Meetings to be heldNumber of Meeting heldDMFT Governing CouncilChitradurga1410Ballari1411Gadag142Bangalore Urban143Vijayanagara*34DMFT Managing CommitteeChitradurga2810Ballari286Gadag283Bangalore Urban283Vijayanagara*84*Vijayanagara DMFT came into being only after the erstwhile Ballari district was bifurcated, leading to creation of Vijayanagara as separate district on November 17, 2021. Hence, the mandatory minimum number of meetings for this test-checked districts are not at the same level as for other four test-checked districts.CAG auditors also found several deviations in the way projects got approved and managed, defeating the very purpose of creating a fund to address the legacy development and welfare issues in mining affected districts. While PMKKKY guidelines of the Union Ministry of Mining, as well as Rule 18(2) of Karnataka DMFT Rules, had unambiguously underlined upon a judicious prioritisation of projects, by defining High Priority Areas (60% fund utilisation) and Other Priority Areas (remaining 40% fund utilisation), the audit observed a relatively lower allocation for projects in areas such as Environment Preservation, Afforestation and Pollution Control measures (EPPC), Welfare of Women and Child Development (WCD); and Welfare of Aged and Disabled People (WAD), Skill Development and Sanitation. The table below suggests how the DMF funds witnessed, what researchers on public finance and accountability have termed as “line department capture” by district level bureaucracy staking a claim to DMF money to finance projects in healthcare, education and water supply sectors; which ideally could have been funded by state government’s budgetary allocations.(Rs in Crore)Specific High Priority AreasAllocationAs Percent of Total Allocation under High PriorityExpenditureAs Percent of Total Expenditure under High PriorityWelfare of Aged and Disabled33.31.4115.951.39Skill Development66.932.8435.883.14Environment Preservation91.413.8846.214.04Women & Child Development138.345.8759.475.21Sanitation157.036.6771.996.30Drinking Water Supply557.2623.66138.0912.09Education637.7327.07346.9230.38Healthcare673.1128.58427.3237.42Total High Priority Areas2355.111141.83 Looked at from the perspective of final expenditure figures, this ad hoc line department capture of PMKKKY funds and its implications become even more clear. To accelerate drinking water programmes, line department tries to capture lion’s share in allocation of DMF money, but it fails to ensure that projects reach completion within stipulated time. As against allocation of Rs 557.26 crore, the utilisation of funds was at a snail’s pace and almost 75% allocation remained unspent. While quantitative figures rarely tell the entire story, those who understand the monitoring and impact evaluation literature well would know that such an ad hoc planning and line department capture eventually results in abandoned and incomplete drinking water pipeline projects.In a shocking audit observation, reported in paragraph 5.6, auditors narrate the tale of how the work of multi-village drinking water project, with an estimated cost of Rs 3.50 crore was executed without ensuring the reliability of water source. This resulted in the entire expenditure of Rs 2.09 crore on this project remaining unfruitful.In order to prevent PMKKKY funds from getting grabbed unjustifiably by physical infrastructure, due to contractor – bureaucrat nexus, the Union government guidelines put such works under ‘Other Priorities’. However, the following table given in the CAG audit report shows how on ground there is very little compliance on this front.Specific Other Priority AreasAllocationAs Percent of Total Allocation under Other PriorityExpenditureAs Percent of Total Expenditure under Other PriorityMiscellaneous55.964.2127.053.95Energy & Watershed Dev82.286.1945.866.70Irrigation105.697.9547.256.90Physical Infrastructure1085.0781.65564.4782.47Total Other Priority Areas1329684.63 Would the Public Accounts Committee of the Karnataka state assembly ask some tough questions and ensure that PMKKKY funds are spent for the purpose as outlined by the Union mines ministry? Mining affected villages are awaiting the follow up corrective action on this important performance audit. Will the state government initiate systemic reforms based on these audit findings?Himanshu Upadhyaya works at School of Management, Prestige University, Indore. Views expressed are personal.