CAG Audit Exposes Massive Irregularities in Himachal Highway Project
A special audit by the Comptroller and Auditor General (CAG), ordered by the Himachal Pradesh high court, has uncovered serious irregularities in land acquisition and compensation disbursement for the Kiratpur-Nerchowk four-lane highway project. The audit revealed irregular payment of Rs 8.29 crore to 52 encroachers for structures built on government land, along with other compensation discrepancies exceeding Rs 14 crore.
Background of the Audit
The audit followed directions from the high court during hearings on a writ petition filed by Madan Sharma, general secretary of the Four Lane Visthapit and Prabhavit Samiti, a Bilaspur-based organization advocating for people displaced by highway projects. The petition alleged irregular land acquisition, compensation to encroachers, and unauthorized deviations in the project's alignment. On July 24, 2024, the high court asked the National Highways Authority of India (NHAI) to explain how compensation was paid to alleged encroachers. Unsatisfied with the NHAI's response on September 17, 2024, the court directed the CAG the following day to conduct an independent audit.
Audit Findings
The CAG initiated the audit on March 7, 2025, and conducted field verifications between March 19 and June 13, 2025, examining 317 land acquisition awards involving 11,840 beneficiaries before submitting its report. The report revealed that Rs 8.29 crore was disbursed between April 2015 and October 2020 to 52 beneficiaries across 19 awards for structures erected on government land. Despite statutory provisions prohibiting government land encroachment, the NHAI compensated encroachers instead of initiating eviction proceedings, the report said. Acquisition records lacked evidence proving that beneficiaries held ownership rights or that the structures were registered before acquisition notifications were issued. While the NHAI asked the Special Land Acquisition Unit (SLAU), Bilaspur, to initiate recovery proceedings in May 2018, no action was taken until May 2025.
Interest Payment Irregularities
The audit flagged an irregular payment of Rs 9.72 crore in interest awarded for structures and trees. It pointed out that the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, permits a 12% interest payment only on the market value of land, not on structures or trees. Forty awards issued between 2015 and 2018 erroneously applied interest to structures and trees, resulting in excess payments, the report said. The CAG termed this an avoidable loss to the public exchequer and recommended immediate recovery.
Delays in Award Announcements
The audit revealed that the valuation of 20 affected structures was completed before January 1, 2015, the cut-off date after which solatium and interest became applicable under the 2013 Act. However, the corresponding awards were announced only between December 2015 and October 2016, a delay of 15 to 27 months. This delay resulted in an avoidable expenditure of Rs 3.97 crore, the report said, adding the NHAI offered no substantive reasons for the delay.
Valuation Methodology Flaws
The report also questioned the methodology used to determine compensation rates across 18 acquired revenue villages, noting sharp variations between original awards in 2013 and supplementary awards issued between 2015 and 2023. In several villages, rates plummeted, while in others they rose dramatically. For instance, compensation in Dadour village declined from Rs 58 lakh to Rs 15.56 lakh per bigha, whereas in Bhour village it surged from Rs 58 lakh to Rs 1.13 crore per bigha, according to the report. The audit observed that these wild fluctuations point to the absence of a transparent, evidence-based valuation methodology.
Other Irregularities
The CAG highlighted an irregular payment of Rs 70.23 lakh for water supply, sanitation, and electricity installations. In multiple cases, extra compensation was paid for incomplete buildings or agricultural sheds that lacked functional utilities, often without any physical verification. Additionally, in seven cases, a literal double payment occurred; Rs 49.04 lakh was disbursed against an entitlement of just Rs 24.52 lakh. In another instance, a mismatch between revenue records and the evaluated area led to an excess payment of Rs 26.14 lakh.
Forest Department Notification Failure
The audit also flagged the NHAI's failure to promptly inform the forest department about changes to the project's alignment. Despite approving modifications for Tunnel-2 and Tunnel-3 in 2013, the NHAI failed to initiate formal correspondence with the forest department for over five-and-a-half years after initial forest clearance was granted. Action was only taken in 2019 after the divisional forest officer, Bilaspur, received complaints regarding alignment deviations and illegal dumping in forest areas.
Summary of Irregularities
- Compensation paid for structures on government land: Rs 8.29 crore
- Interest paid on structures and trees: Rs 9.72 crore
- Avoidable payment due to delayed awards: Rs 3.97 crore
