Kathmandu, September 14

Nepal has sealed a long-awaited deal with the Millennium Challenge Corporation (MCC) — an independent US government agency working to reduce global poverty through economic development — to mobilise $500 million grant for the development of energy and road transport sector, which are considered the major constraints for the economic growth of the country.

Finance Minister Gyanendra Bahadur Karki and Jonathan Nash, acting chief executive officer of the MCC, signed the pact in Washington, DC today.

Talking to The Himalayan Times over phone from Washington, DC, Baikuntha Aryal, head of the International Economic Cooperation Coordination Division, said that the US government’s grant will be instrumental in transforming the economic landscape of the country through development of electricity transmission line via major load centres of the country to Indian border, which will also facilitate cross-border electricity trade. “Also, upgradation of major highways will be the lifeline for country’s economic development.”

Nepal will be able to mobilise $630 million — $500 million from MCC and $130 million from Nepal government as counterpart fund — for installation of 300-km high voltage electricity transmission lines along with three substations of 400 kV and maintenance of roads with total length of 305 km.

“These projects need to be implemented within five years from starting date of project, otherwise the money will go back to the US,” Aryal said. Nepal government is responsible for land acquisition, resettlement and right of way clearance to implement the projects.

The MCC had selected Nepal for a smaller threshold programme in December of 2011. The MCC and Nepal government 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, under which the country is going to mobilise the US grant.

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.

Office of the Millennium Challenge Nepal (OMCN) — a Nepal government office which coordinates development of MCC programme — in coordination with MCC, had finalised the projects that are going to be implemented under the MCC grant.

Identified projects

Transmission line and substations (400 kV)

• Lapsifedi (Kathmandu)-Damauli (Tanahu)
• Galchhi (Dhading)-Hetauda (Makawanpur)
• Damauli (Tanahu)-Sunwal (Nawalparasi)
• Three substations (of 400 kV) at Galchhi, Damauli and Sunwal (India border)

Road maintenance

• Mechi Highway
• Koshi Highway
• Sagarmatha Highway
• Tribhuvan Rajpath (Bhaise-Hetauda section)
• Bhaise-Bhimphedi
• Amelia (Dang) to Tulsipur (Dang)