Over the last few days, the $500 million Millennium Challenge Corporation Nepal Compact has again shaken up the Nepali political landscape.

This time, the project that has become a major political agenda—more than a grant agreement—has shaken the very foundation of the five-party ruling coalition led by the Nepali Congress.

Prime Minister Sher Bahadur Deuba sent shockwaves in the coalition by again pressing the partners, especially the Communist Party of Nepal (Maoist Centre) and the CPN (Unified Socialist), to table the MCC in Parliament without any further delay.

Both the Maoist Centre and the CPN (Unified Socialist) have been saying that the US compact cannot be endorsed in its existing form, despite the MCC clarifying many of the questions sent by the Finance Ministry.

“Prime Minister Deuba has been pressing the coalition partners to table the MCC compact in Parliament saying that the Americans have said they would take the grant back if it is not endorsed by February 1,” said Jhala Nath Khanal, a senior leader of the CPN (Unified Socialist) who is leading a task force formed to study the MCC compact.

On December 19, the ruling coalition had formed the three-member panel including Narayan Kaji Shrestha from the Maoist Centre and government spokesperson Minister Gyanendra Bahadur Karki from the Nepali Congress as members, to study the US compact.

However, the task force has not made any progress as two of the members, Khanal and Shrestha, are against ratifying the project without amendment while Karki has been lobbying to endorse the compact in its given form.

Karki was finance minister when the US grant project was signed in September 2017. Then joint-secretary Baikuntha Aryal and Jonathan Nash, acting chief executive officer of the MCC, had signed an agreement in the presence of the then finance minister Gyanendra Bahadur Karki and US Deputy Secretary of State John J Sullivan in Washington.

The US government agreed to provide $500 million in grants while Nepal would contribute $130 million for the project that prioritises energy and roadways. If endorsed, this will be the largest grant Nepal has ever received.

There wasn’t much dispute over the compact until David J Ranz, assistant secretary for South Asia at the US State Department, during his Nepal visit in May last year said that the MCC was a crucial part of the Indo-Pacific Strategy.

“We have got more new documents of some 900 pages on MCC which need weeks to study,” said Khanal, a former prime minister. “Still there are no similar views on MCC in the ruling coalition—some want to endorse it as it is but we are saying that must be amended.”

Leaders close to Maoist Centre chair Pushpa Kamal Dahal have said the prime minister has been pressing the coalition partners to table the MCC compact in parliament, and to avoid tabling it, the meeting of the House of Representatives scheduled for Sunday was postponed for 10 days under the pretext of Covid surge.

“Now the MCC is not limited to a grant project, it has become a hot political agenda,” said a central committee member of the Maoist Centre asking not to be named. “Actually we are postponing the meeting of parliament just to delay the tabling of the MCC.”

Recently the eighth national convention of the Maoist Centre had endorsed Dahal’s proposal to pass the MCC only after revision although most of the party’s delegates had demanded that the compact must be annulled because many of its provisions were against national interests.

Following media reports that the prime minister has been preparing to table the MCC compact in parliament, the International Department head of the Chinese Communist Party Song Tao held a one-to-one virtual meeting with Dahal on Saturday.

“It seems that China wants to stop the MCC from getting it through parliament with the help of Dahal,” said the central committee member of the Maoist Centre.

Another central committee member of the party, Yubaraj Dulal, however, said it is Dahal who has been stopping the passage of the MCC compact, otherwise it would have been passed long ago.

Except a handful of leaders almost all Maoist Centre and the CPN (Unified Socialist) leaders are against endorsing the MCC in its present form, but former prime minister Baburam Bhattarai who is a leader of another coalition partner Janata Samajbadi Party, has long been urging the coalition partners to endorse it.

But despite deep divisions among the ruling coalition partners over the US compact, leaders of the Maoist Centre and the CPN (Unified Socialist) say the MCC issue will not affect the coalition government in any way as a breakup of the current coalition will cost Prime Minister Deuba his chair.

Though some leaders have said the prime minister had pressed the leaders of coalition partners to table the MCC in parliament during their meeting on Saturday, Madhav Nepal, chairman of the CPN (Unified Socialist) claimed that he was not aware of such a discussion during the meeting.

Talking to the Post on Saturday evening, Nepal claimed that there was no situation to move ahead with the MCC because the task force formed to study it has not submitted a report yet.

The leaders of the two parties–Maoist Centre and CPN (Unified Socialist)–have been saying that they would better opt to remain out of the coalition than to endorse the compact ahead of the elections.

“I don’t think the prime minister will decide to break up the existing coalition by endorsing the MCC at a time when major elections are round the corner,” said Jagannath Khatiwada, deputy general secretary of the CPN (Unified Socialist) and the party’s spokesperson. “It is unlikely that the two rivals Nepali Congress and the CPN-UML will form a new coalition before the upcoming polls.”

Both the Maoist Centre and the CPN (Unified Socialist) also fear that they will not be able to perform better in the upcoming elections if Deuba breaks up the alliance and they have to fight the elections individually.

On Monday, again Dahal and Nepal held a meeting with the prime minister at Baluwatar. The three leaders had discussed various contemporary issues with the MCC at the centre stage.