MCC project cost may go up

The Millennium Challenge Account (MCA) Nepal may require an additional Rs 5 billion to complete its projects due to an increase in estimated costs. Nepal signed the MCC Compact in 2017, and the compact is set to be implemented from this September. “The implementation phase is beginning six years after the compact was signed. Factors such as inflation may contribute to the funding shortfall,” said Khadga Bisht, the executive director of MCA Nepal.

Nepal was selected for the MCC compact in 2011. It, however, took six years to sign the compact. The compact was signed in Washington DC by Gyanendra Bahadur Karki, the then-Minister for Finance, and Jonathan Nash, MCC's Acting CEO, on September 14, 2017. The agreement was ratified by the parliament on February 27, 2022.

As part of the MCC, Nepal is receiving $500 million, or around Rs 60 billion, to implement transmission line and road rehabilitation projects. "All vendors for these projects will have to be paid in US dollars, and prices have increased over the past six years. The Russia-Ukraine conflict has increased inflation further. Due to these factors, we estimate that the projects will face a shortfall of funds," added Bisht. After the compact was ratified by the parliament, MCA Nepal started implementing several preparatory works. Of the six pre-conditions for the projects, five have been fulfilled, while work is still underway to fulfill the sixth. According to Bisht, works such as the design and demarcation of transmission lines, preparation of environmental impact assessment (EIA), and the maintenance of a database of affected areas are currently underway. Land acquisition is currently underway in six out of the 10 districts that will be affected by the projects. These include Nawalpur, Chitwan, Palpa, Dhading, Tanahun, and Nawalparasi. Similarly, preparations are underway to begin land acquisition works in Nuwakot and Makwanpur. After that, MCA Nepal plans to begin acquisition works in Sindhupalchowk and Kathmandu districts. "We will have a better idea of the integrated cost once all land acquisition works are completed. Only then will we be able to determine how much additional funding will be needed for the project," Bisht explained. According to the EIA report, as many as 743 towers will need to be erected for the 315-kilometer transmission line. This will require felling of 200,200 trees in forests covering an area of 7,000 ropanis. MCA Nepal has announced plans to plant one tree for every tree felled as part of the project. However, the government has stated that 10 trees should be planted for every tree cut down. Bisht stated that they will finalize the number of trees to be planted very soon. MCA Nepal plans to begin tree marking work in April and complete it by June. As part of the transmission line project, MCA Nepal will build three 400 kV gas insulated substations in Ratamate of Nuwakot, Damauli of Tanahu, and Bhumahi in Nawalparasi. Additionally, the Lapsiphedi-Hetauda transmission line will be connected to Nepal Electricity Authority's existing substation in Hetauda. MCA Nepal estimates that approximately Rs 7 billion will be required for land acquisition. Thus far, it has spent around Rs 1.4 billion for the acquisition of around 400 ropanis of land for the Ratamate sub-station in Nuwakot. MCA Nepal has already invited tenders to select contractors and consultants for the project. Additionally, it plans to invite tenders to build substations in the near future. Bisht stated that MCA Nepal plans to sign agreements with the selected contractor and consultant in September. The five-year MCC clock will begin ticking from that date. Similarly, preparations for the road component of the compact have also begun. MCA Nepal will use the compact to upgrade 77 kilometers of the East-West Highway from Dang. For the first time in Nepal, MCA Nepal is introducing new technologies like full-depth reclamation and superior performing asphalt pavement (SuperPave). To facilitate the adoption of these technologies, six laboratories have already been set up at the Department of Roads. According to MCA Nepal, the design for the road has already been prepared. Likewise, MCA Nepal will also conduct regular maintenance on another 100 kilometers of road on the East-West Highway. Although the road section for maintenance has not been selected, Bisht stated that the Department of Roads could select the Mugling-Narayanghat road section.