Alice P Albright, chief executive officer of the Millennium Challenge Corporation, is scheduled to visit Nepal next month to mark the formal beginning of the MCC Compact implementation, which involves transmission line construction and improvement of a highway section.

A 315-km high capacity transmission line will be built and a section of the East-West Highway improved under the $500 million US aid.

Ahead of the planned entry into force of the MCC Compact, which runs for five years, the highest-level MCC delegation is visiting Nepal, officials at the Millennium Challenge Account-Nepal said. The MCA-Nepal is a special purpose vehicle established to implement the MCC Compact in the country.

“A tentative date for entry into force of the MCC Compact has been set at August 30,” an MCA-Nepal official told the Post. “CEO Albright and some vice-presidents of the MCC are scheduled to visit Nepal to mark the event. Her visit is more or less set.”

The official said that a small event would be organised to begin the implementation of the MCC Compact.

Even though the country saw massive protests against the compact in the run-up to its parliamentary ratification in February last year, it has been smooth sailing for the MCA-Nepal to carry out preparatory works before the compact enters into force.

Before parliamentary ratification of the compact, protests were organised against the compact claiming that it is a part of the American Indo-Pacific Strategy at containing China while pointing out Nepal’s non-aligned foreign policy. As a result, ratification was delayed even though the two sides signed the agreement in September 2017.

After strong US pressure that included a warning to review Nepal ties, Nepali political leaders agreed to ratify the MCC Compact with a 12-point interpretative declaration. Since its ratification, there have, however, been no protests against the compact. Now the momentum is building for the implementation of projects under the compact ahead of its formal commencement.

The MCA-Nepal has initiated the process of acquiring land and hiring contractors and a consultant for the transmission line and substations. Contractor-hiring process is underway after six companies—all from India—participated in a bid.

The selection of contractors will be made after technical and financial evaluation of their bids, the MCA-Nepal said. “Once entry into force is formally declared, the contractors will also be selected,” the official said.

There are separate packages of the proposed 315-km transmission line. The packages include the Lapsephedi-Ratmate-New Hetauda 400kV D/C transmission line, the Ratmate-New Damauli 400kV D/C transmission line, the New Damauli-New Butwal 400kV D/C transmission line (Base), and the New Butwal-Nepal/India Border 400kV D/C transmission line.

With a $500 million US grant and Nepal’s $197 million matching fund, including the recently added $67 million, a 315-km high capacity transmission line will be built and a section of the East-West Highway improved, according to the MCA-Nepal.

The government expects to spend a significant chunk of the national budget to implement MCC projects in the next fiscal year 2023-24.

It has allocated Rs10.84 billion for the MCA-Nepal for the next fiscal year beginning in mid-July. Rs9.27 billion had been set aside for the entity in the current fiscal year 2022-23, but only around Rs1.54 billion is expected to be spent by the end of the fiscal year, according to the MCA-Nepal. Earlier, the spending was poorer still, with just Rs573 million spent in fiscal 2021-22.

However, the MCA-Nepal officials say that as construction could start in the next fiscal year, they expect to spend more—particularly for acquiring lands and distributing mobilisation advance to contractors.

“Most of the land that falls along the alignment of the transmission line will be acquired in the fiscal 2023-24,” Khadga Bahadur Bisht, executive director of MCA-Nepal, told the post earlier. “Once the contract is signed, we need to pay the contractors mobilisation advance for which a sizable amount will be spent.”

Of the total budget allocated for MCA-Nepal, as much as Rs5.36 billion has been set aside for building infrastructure for the transmission line, while Rs2 billion will be spent to acquire land for pylons. Rs1.04 billion has been allocated for road and bridge construction and Rs1.28 billion for consultancy services, according to the detailed estimate of expenditure also known as “Budget Red Book” prepared by the Finance Ministry.

Despite expectation of better spending in the next fiscal year, the special purpose vehicle is aware of the challenges particularly related to acquiring land for the transmission line project.

“Project-affected people are worried that the compensation may not be satisfactory,” it said in a recent response to the Post. “It will not be a matter of surprise if MCA-Nepal would have to face challenges in the process of land acquisition based on the experiences of other similar projects.”

However, it said it hopes the process would move ahead smoothly just like at Ratmate (substation) where they implemented the ‘unique’ Rehabilitation Action Plan and Livelihood Restoration Program for the project-affected people.

The MCA-Nepal, however, expects a continued favourable political environment while carrying out the transmission line and road improvement projects.