Nepal’s ruling alliance partners are confused.

They seem to be trying to figure out how to perceive, deal with and ratify the Millennium Challenge Corporation, the $500 million American grant to Nepal which has once again become a major bone of contention.

The coalition government on December 19 formed a task force to “study” the US grant, commonly known as MCC, and hammer out a common position.

The task force, however, is yet to submit its report to the top political leadership.

A task force member said they have failed to submit the report after differences persisted.

“We, however, have communicated what we had to,” the member said on the condition of anonymity.

The task force is headed by CPN (Unified Socialist) leader Jhala Nath Khanal. It has Maoist Centre leader Narayan Kaji Shreshtha and Nepali Congress leader Gyanendra Bahadur Karki, also the minister for communication and information technology, as members.

Both Khanal and Shrestha are known opposers of the MCC compact.

Karki was the finance minister in September 2017 when Nepal and the US signed the MCC agreement.

Earlier in February 2020 also Khanal had headed a task force of the then Nepal Communist Party (NCP). The Khanal-led team had then suggested to the party leadership that the US compact should not be passed in its existing form as some provisions were concerning.

The party, however, was invalidated in March last year, and the two constituents—CPN-UML and the Maoist Centre—which had merged to form the party were revived.

Khanal, a former prime minister, is now senior leader of the CPN (Unified Socialist), which was formed in August last year after splitting from the UML.

As the ruling alliance is divided over the MCC compact’s parliamentary ratification, the Khanal-led task force has failed to offer any suggestions to the leadership.

According to sources, the task force members are divided along party lines.

Khanal and Shrestha have strong views against a parliamentary ratification, while Karki is in favour.

During the last meeting of the task force on Wednesday, Karki said, opinions were sharply divided among the members.

“It became apparent that we won’t be able to reach a conclusion even if we continue discussing the matter for another six months as the differences remain the same,” said Karki. “Both Khanal and Shrestha are of the view that some provisions of the compact need amendments.”

According to Karki, since the US has already made it clear that there is no possibility of amendments, there was no point in continuing discussions at the task force level.

“So we decided to brief the leadership the same… that there were differences among members,” Karki told the Post.

Another task force member also said it became difficult for them to reach a conclusion even after several meetings. “On Wednesday we had briefed the top leaders of the ruling alliance on our disagreements,” the member told the Post. “Now our task is over.”

Some, including the UML, have even questioned the rationale behind forming the task force. In a statement a few days ago, the UML described the formation of the task force in the name of studying the US grant as a childish move, as one of the members oversaw the signing of the agreement in 2017.

After continued reservations from the two coalition partners, Prime Minister Sher Bahadur Deuba is learnt to have been in talks with opposition leader KP Sharma Oli to get the MCC passed from Parliament.

Deuba, however, fears such a move could lead to a breakdown of the current coalition. Not only will it lead to collapse of the government but could also give rise to prospects of a left alliance between the UML and Maoist Centre like in 2017.

Nepal has committed an additional $130 million to the MCC’s $500 million. As per the agreement, the funds will be spent on building transmission lines and improving roads.

As politicians in Nepal wavered, senior US State Department officials and high-ranking MCC officials visited Kathmandu and met with political party leaders.

After the present ruling alliance failed to table the MCC compact in Parliament which is a prerequisite for its implementation, Prime Minister Deuba and Moaist Centre chair Dahal wrote two letters to the MCC headquarters in October and November, said sources close to the prime minister.

One joint letter was sent in September promising the ratification of the compact, and another was written in November seeking more time for the parliamentary ratification because both Deuba and Dahal were busy in the general conventions of their respective parties.

Now both the Nepali Congress and the Maoist Centre have concluded their general conventions so MCC officials and US authorities have started exerting pressure on Deuba to ratify the MCC agreement before February 28, according to a leader close to Deuba.

“The prime minister is concerned because it is a moral, political and diplomatic obligation of his government to get the compact endorsed,” the leader told the Post.

In an interview with the Post on January 16, Mahmoud Bah, acting chief executive officer at the MCC, said that continued delays in ratification have put the MCC headquarters in a position where it can no longer wait.

“The time has come for the government to take action and decide if it would like to continue its partnership with the MCC,” said Bah. “We all know that the longer construction projects are delayed, the more expensive they become, and the longer Nepali communities must wait for reliable power and improved road conditions.”

Khanal, the coordinator of the task force, said there are differences between members on several points.

“Minister Karki and we (me and Shrestha) had disputes and differences over 25 points of the MCC compact during our study so we could not reach any agreement,” Khanal told the Post. “We have just received seven new documents related to the MCC agreement that were concealed by the erstwhile KP Sharma Oli government.”

According to Khanal, the new documents are heavy and will take several days to study.

“Our differences were likely to increase,” said Khanal. “So we decided to communicate to the top leadership that we failed to reach an agreement.”

The Millennium Challenge Corporation-Nepal Account, however, has already refuted claims that there were some hidden and secret documents.