The government has decided to increase its share of contribution to implement the transmission line projects under the Nepal Compact of the Millennium Challenge Corporation (MCC). MCC, the US aid agency has committed to provide $500m while the government had earlier pledged $130m to implement the transmission line and road improvement projects under the MCC compact. The Millennium Challenge Account-Nepal (MCA-Nepal), a special-purpose vehicle established to implement the compact, said on Monday in a press statement that the government will provide an additional $67m to cover some of the additional work proposed by the Nepal Electricity Authority (NEA). With the additional budget assurance, the government’s contribution has reached 28 percent of the total resources to be available for implementing the MCC program from just over 20 percent earlier. MCA-Nepal said that the government decided to incorporate NEA’s request to include additional works under the Electricity Transmission Project of the MCC Compact. “It is estimated that a budget of up to $67m might be required for the additional work which will be financed from the original compact budget,” reads the statement.

According to the statement, after the full utilization of the original budget, any shortfall would be financed by the NEA. An official of the MCA Nepal said that the NEA had requested to add substation bays that would enable controlled connection of power to the substations. “As per the NEA’s request, we have to add many such bays which require further funding,” the official said.

The additional budget was arranged to bridge the estimated shortfall of resources in the construction of the Nepal-India cross-border transmission line and additional scope of work in the three substations, i.e. installation of additional bays as per the current and future requirement of NEA, MCA-Nepal said. Even though NEA was considering constructing a 20-km section of the New Butwal to India border transmission line, MCA-Nepal itself decided to construct this section of the transmission line as its preparation was in an advanced stage compared to NEA. According to the MCA-Nepal, an increased financing pledge by the government has been considered as the government’s contribution to the compact purpose. “A simultaneous modification has been made in the annexes of the Compact through an implementation letter,” said MCA Nepal. There is also concern that the allocated budget would be enough to construct the 315 km power line because the last estimated cost of the projects to be implemented under MCC was made in 2016. “Any additional cost should be borne by the Nepal government,” said the official. There has been visible progress in the preparation and implementation of MCC Compact projects in Nepal after the compact was ratified by the House of Representatives in February last year. Last week, MCA-Nepal opened the bids to hire companies for the construction of 315 km long power lines. Six Indian companies have submitted bids to construct the power line which will be constructed in three separate packages. An association of Megha Engineering and Infrastructure Ltd and Power Mech Projects Ltd along with Kalpataru Power Transmission Limited, KEC International Ltd, Transrail Lighting Ltd, Tata Projects Ltd and Larsen & Toubro Ltd participated in the bid. According to the MCA-Nepal, though MCA-Nepal called for international bidding, only the Indian companies participated in the process. “Now, their evaluation process begins,” said the MCA-Nepal official. The three packages of the power line include Lapsiphedi-Ratmate-New Hetauda 400kV D/C Transmission Line, Ratmate-New Damauli 400kV D/C Transmission Line, New Damauli-New Butwal 400kV D/C Transmission Line (Base), and New Butwal Nepal/India Border 400kV D/C Transmission Line. The high-capacity transmission lines will be built connecting Nepal's major power consumption centers including Kathmandu Valley, Butwal and Hetauda. This transmission line will also work as a bridge to link the eastern and western parts of the country with high-capacity transmission lines. Alongside the procurement process of contractors, MCA-Nepal has also initiated the process of acquiring lands for the transmission towers. It plans to determine the compensation amount before the entry into force of the MCC Compact scheduled to take place in August.