The $500m project entails building power lines and roads in regions of strategic importance.
August 09, 2019
Millennium Challenge Account-Nepal on Thursday announced that the $500 million Nepal Compact signed between Millennium Challenge Corporation of the US and the Nepal government would go into effect on June 30, 2020.
Viewed by many in Nepal as a counter-initiative under the Indo-Pacific Strategy of the US administration against China’s Belt and Road Initiative, the multimillion dollar project entails building power lines and roads in regions of strategic importance under what is called the Electricity Transmission Project and Transportation Project.
Earlier, the Compact was expected to enter into force by September 2019.
Issuing a statement on Thursday, the implementing agency said that the implementation method requires that enough time be allotted to the project preparatory phase so that all conditions for successful project delivery are met prior to the implementation activities.
“Following ‘Entry into Force’, all implementation activities must be completed within five years, as there are no provisions for time extension or cost increase,” said Millennium Challenge Account-Nepal.
Of the conditions precedent over implementation of the project, the government has already declared the transmission project as a national priority project and legislation has been passed forming the Electricity Regulatory Commission this year. The conditions are two of the six prerequisites of entry into force.
The Compact is yet to be ratified by Parliament, and Nepal and India are yet to enter into an agreement to build a cross-border transmission line under the Electricity Transmission Project.
According to Millennium Challenge Account-Nepal, the detailed design work, finalisation of the transmission line alignment, and tendering as well as planning of the contractor selection process are progressing well.
The Compact, which has been tabled in Parliament for ratification to ensure that it prevails over domestic laws, includes two components—the construction of about 300 km of 400 kV electricity transmission lines and three substations and technical assistance for the power sector, and technical assistance to improve the road maintenance regime, and road maintenance work on about 300 km of the strategic road network in the southern plains.
“The project (transmission) will expand and strengthen the high voltage electricity transmission network to support new investments in generation. And it will add a second high capacity cross-border transmission line to facilitate electricity trade with India,” said the US donor.
Also, according to Millennium Challenge Corporation, Nepal struggles with poor road quality, inefficient customs and border enforcement, an inefficient trucking industry, and poor road coverage. The road project will encourage the expansion of Nepal’s transportation sector in addition to the periodic maintenance of up to 305 km of the country’s strategic road network.
As per the clauses of the Compact, once it enters into force, the projects must be concluded within five years from the date or else the funds will go back to Millennium Challenge Corporation.
In 2017, the US donor had committed to provide $500 million and the Nepal government had agreed to put up an additional $130 million for the purpose.
According to Millennium Challenge Account-Nepal, a body set up by the Cabinet to implement the project, the Compact aims to help spur investments and accelerate economic growth by increasing availability and reliability of electricity, maintaining road quality and facilitating power trade between Nepal and India.
In a first step in project implementation prior to entry into force, the implementing agency in May had requested prospective contractors to come forward and share information on the 400 kV transmission lines and construction standards and modalities.
Source: The Kathmandu Post