Six years after Nepal signed an agreement with the Millennium Challenge Corporation (MCC), the much-debated MCC Nepal Compact will finally enter into the implementation phase on Wednesday.
The MCC Nepal Compact implementation will formally be announced at a formal program at the Finance Ministry on Wednesday through an official ‘Letter of Exchange’ between the officials of Nepal and the United States. Finance Minister Dr. Prakash Saran Mahat and MCC Vice President Cameron Alford will attend the event which will be the entry into force (EIF) of the MCC Nepal Compact.
The countdown for the five-year project will begin from the day of EIF. “The last date of the Nepal Compact is August 30, 2028,” said an official of Millennium Challenge Account (MCA) Nepal, a special-purpose vehicle established to implement the Nepal Compact. Earlier on August 16, a meeting of the board of directors of Millennium Challenge Account (MCA) Nepal, fixed August 30 as the date for EIF.
The execution of the Nepal Compact will span a precise five-year duration from its initiation, at which point the responsibility for the projects will shift to Nepal. Once this five-year period concludes, the funding from the MCC for the execution of the MCC Compact initiatives will cease.
Initially, the Nepal Compact was supposed to enter into the implementation stage on June 30, 2020. However, the delay in the ratification of the compact by Nepal’s Parliament amid a controversy threw the US assistance into uncertainty. The Nepal Compact finally moved ahead after the parliament endorsed it in February 2022.
MCC, the US aid agency has committed to provide $500 million while the government had earlier pledged $197 million to implement the transmission line and road improvement projects under the MCC Nepal Compact.
A 315-km high-capacity transmission line will be built and a section of the East-West Highway upgraded under the $500 million US aid. Five segments of transmission lines to be built are—New Butwal-India Border (18km), New Butwal-New Damauli (90km), New Damauli-Ratmate (90km), Ratmate-New Hetauda (58km), and Ratmate-Lapsephedi (59km). Three substations will be built in Ratmate, Damauli, and Butwal.
Once completed, these transmission lines are expected to provide a vital missing link for power projects of different river basins to the existing high-voltage grid in Nepal.
The government has allocated Rs 10.84 billion for the MCA-Nepal for the current fiscal year. While Rs 9.27 billion had been set aside for the entity in the last fiscal year, only Rs 4.11 billion was spent, according to the Finance Ministry.
With only two weeks left for entry into force, the preparatory work of the MCA Nepal Compact is far from over. Mainly, the land acquisition for the transmission lines has not been completed. Approximately 104 hectares of land will be procured across 10 districts to accommodate the towers needed for the 315 km transmission line corridor.
According to MCA Nepal, five out of the six prerequisites outlined in the compact agreement necessary for its execution have been met. These include designating the electricity transmission project as a matter of national importance, enacting legislation to establish the Electricity Regulatory Commission, finalizing the Project Implementation Agreement (PIA), formulating an operational work plan, reaching agreements between Nepal and the Indian governments regarding cross-border transmission lines, and securing approval for the compact from Nepal's Parliament.
MCA-Nepal has to acquire lands in Chitwan, Nawalparasi and Nawalpur, Kavrepalanchok, Kathmandu, Dhading, Makwanpur, Palpa, Rupandehi, and Tanahun for the transmission line project.
Except for Kathmandu, the process of land acquisition has started in other nine districts. A compensation and compensation determination committee has been formed under the coordination of the Chief District Officer.
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.
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.
The MCA Nepal has also opened a tender for the construction of the substation. The last date for the submission of the bid is September 4th.
