Nepal and the United States of America will finally sign a grant agreement worth $500 million under the Millennium Challenge Corporation (MCC) — an independent US government agency working to reduce global poverty through economic development. The grant agreement is scheduled to be signed on September 14. The Nepali delegation, led by Finance Minister Gyanendra Bahadur Karki, will visit the US next week to sign the pact.
Nepal will be able to mobilise $630 million — $500 million from MCC and $130 million from Nepal government as counterpart fund — in electricity transmission and transportation sector over the next five years. MCC and the Nepal government have mutually agreed to focus on addressing two binding constraints to economic growth, which are the inadequate supply of electricity and the high cost of transportation.
The MCC had selected Nepal for a smaller threshold programme in December of 2011. The MCC and the government of Nepal had analysed constraints to economic growth and jointly prepared a policy improvement programme based on the results. Given Nepal’s strong performance in its MCC policy indicator scorecard through 2014, MCC’s board of directors selected Nepal as being eligible to develop a compact, a larger grant-based investment.
The compact programme is expected to address these constraints by investing in an Electricity Transmission Project (ETP) and a Road Maintenance Project (RMP). ETP would transform Nepal’s power sector by expanding and strengthening the high voltage electricity transmission network to support new investments in generation and allow greater cross-border electricity trade. The RMP is expected to improve the road maintenance regime in Nepal and complement existing efforts to build new roads by other parties.
The Office of the Millennium Challenge Nepal (OMCN) — a Nepal government office which coordinates development of the MCC programme — has finalised the projects in coordination with MCC that are going to be implemented under the MCC grant. Once the project implementation kicks off, it should be completed within five years. If the country fails to mobilise the grant properly on time all the money will go back to the US, as per Tulasi Prasad Sitaula, national coordinator for OMCN.
The government of Nepal has to clear the right of way for the implementation of the projects.
Transmission line and substations (400kv) projects
- Lapsifedi (Kathmandu)-Damauli (Tanahu)
- Galchhi (Dhading)-Hetauda (Makawanpur)
- Damauli (Tanahu)-Sunwal (Nawalparasi)-India border
- Three substations (of 400 kv) at Galchhi, Damauli and Sunwal
Road maintenance projects
- Mechi Highway
- Koshi Highway
- Sagarmatha Highway
- Tribhuvan Rajpath (Bhaise-Hetauda section)
- Amelia (Dang) to Tulsipur (Dang)