The Ruling Nepal Communist Party has decided to put projects under the Millennium Challenge Corporation Nepal Compact on hold until Parliament decides its fate.

The decision was taken on Saturday by a meeting of the party Secretariat, which discussed the compact after projects under the controversial US grant-funded programme were included in the government’s budget for 2020/21 even as Parliament is yet to ratify the deal.

“Today’s meeting has decided to put some [announced] projects that are under the MCC on hold until it [the MCC] is ratified by Parliament,” said Narayan Kaji Shrestha, party’s spokesperson, following the meeting.

“The government will have to amend its budget and seek alternative funding for the projects concerned if Parliament doesn’t ratify the MCC compact,” he added.

Under the MCC deal signed by the US and Nepal in September 2017, the US government agreed to provide $500 million in grants— the largest Nepal has ever received—while Nepal would put in $130 million for projects that prioritise energy and roadways.

As per the deal, the funds will be spent on setting up a 400KV transmission line running 400 kilometres on the Lapsiphedi-Galchhi-Damauli-Sunawal power corridor. The funds will also be used to set up three substations en route to infrastructure that will connect to the cross-border transmission line with India in Rupandehi. Some $130 million under the MCC compact will go towards the maintenance of around 300 kilometres of roads on the East-West Highway.

The compact is yet to be ratified by Nepal’s Parliament. But the government’s policy and programmes for 2020/21 includes Lapsiphedi-Ratamate-Hetauda and Lapsiphedi-Ratamate-Damauli-Butwal 400kV transmission lines, projects chosen for the compact. The MCC was included also in the annex of the budget for the next fiscal year 2020-21 also, which was presented on Thursday.

The meeting took place ahead of the scheduled parliamentary discussions over the government’s budget. According to party leaders, Finance Minister Yubaraj Khatiwada will clarify the government’s stance on the issue before Parliament during the deliberations.

In addition to the nine Secretariat members of the party, including party chair and Prime Minister KP Sharma Oli and the co-chair Pushpa Kamal Dahal, Finance Minister Yubaraj Khatiwada and Foreign Minister Pradeep Gyawali as well as Standing Committee member Bhim Rawal, one of the most vocal critics of the deal, were present during the the meeting.

According to sources, leaders opposed to the deal were furious over the inclusion of the MCC projects in government documents without the party’s nod. Finance Minister Khatiwada, however, claimed that the MCC projects had been a part of the government’s programmes for the last two fiscal years.

Members of the ruling party are divided over the fate of the MCC as a section of the leaders say it undermines Nepal’s sovereignty. While Prime Minister Oli has been consistently pushing for its early ratification, opposition voices continue to grow louder.

However, the federal parliament has already endorsed the policy and programmes, which included MCC projects.

Party senior leader and former Prime Minister Jhalanath Khanal and Rawal on May 18 had even written to the prime minister reminding him of the suggestions made by a task force formed by the party to study the MCC compact and make recommendations. The task force had said the MCC should not be ratified in its present form.

“Today’s meeting decided to halt MCC-related projects until the party decides its fate,” said Jhalanath Khanal. “The prime minister wanted to get the MCC approved through the back door, but that is not possible now.”

If the party decides to drop the MCC, leaders said the government will have to amend its budget to reflect the decision before it is approved by Parliament.

Prime Minister Oli has told his party’s lawmakers that the government will manage other funds for the projects if Parliament doesn’t ratify the deal. But a section of the leaders doubt such expensive projects can be implemented without accepting a big grant like the MCC.

According to Khanal, the party will convene a meeting of the Standing Committee soon to decide the fate of the MCC. After a majority of Secretariat members stood against the MCC, the prime minister had earlier agreed to direct government authorities to put the projects on hold. But the projects were included in the policy and programmes.

According to a secretariat member, during the meeting on Saturday, Vice-chair Bamdev Gautam yelled at Khatiwada for “disgracing the party” by including the MCC in the government’s budget before the party took a decision on it.

Though Rawal claimed that it was a grave mistake on the part of the government to include the MCC in the budget, another Standing Committee member and Foreign Minister Gyawali said the MCC should be ratified as failing to do so could cause diplomatic friction with the US.

Prime minister Oli remained calm during the meeting even when most members were furious over the inclusion of the MCC in the budget.

“The MCC is still under consideration in Parliament and it would only be implemented after Parliament’s ratification,” a secretariat member quoted the PM as saying. Oli also told the leaders that he would give necessary instructions to the concerned authorities not to move ahead the related projects unless the MCC is ratified.