The Millennium Challenge Corporation Nepal Compact, which stirred huge political controversy in the run-up-to its parliamentary ratification in February 2022, has completed a year of its entry into force.

The compact involves building a 315-km 400kV transmission line and upgrading a section of the East-West Highway with $500 million in funding from the MCC and a $197 billion contribution from the Nepal government.

The five-year American aid programme, which faced significant controversy in Nepal, is now under pressure to complete the twin tasks within the stipulated five years by awarding the remaining transmission line tender.

At a press conference on August 22, US Ambassador to Nepal Dean Thompson, MCC Resident Country Director Coordinator Diane L Francisco, and Khadga Bahadur Bisht, executive director of Millennium Challenge Account-Nepal (MCA-Nepal), expressed satisfaction with the past year’s achievements and expressed hope that the project would be completed within the stipulated time.

To mark the first anniversary of the MCC Nepal Compact’s entry into force, MCA-Nepal, a special purpose vehicle set up to implement the MCC projects, signed a contract for the crucial 18-km cross-border transmission line in Kathmandu on Friday.

This line is a key component of the broader Electricity Transmission Project funded by the governments of Nepal and the US. The next big hurdle is opening the bid and awarding the tender for the remaining 297 kilometres of the transmission line.

MCA-Nepal said in a statement on Friday preparations are on track to launch the bid before the end of this year.

“As MCA-Nepal marks the one-year anniversary of the compact’s Entry-Into-Force, this new milestone reflects the unwavering commitment from all stakeholders to enhancing regional energy trade between Nepal and India. The contract, valued at $12.36 million, has been awarded to Transrail Lighting Ltd., which will construct the transmission line from the 400 kV New Butwal Substation in Nawalparasi-Bardaghat-Susta West to the Nepal-India border within the contract duration of 21 months,” the statement said.

A senior government official told the Post that land acquisition is the most critical component of this project, as it is in most cases in Nepal.

“If we fail to acquire the necessary land and the project is not completed within four years, the remaining MCC investment will be returned,” the official said, requesting anonymity.

The MCC has committed $500 million, while the government of Nepal will contribute $197 million.

On Friday, Khadga Bahadur Bisht, executive director of MCA-Nepal, and Amol Wankhede, representative of Transrail Lighting Ltd, signed the contract for the cross-border transmission line.

During the press conference on August 22, US Ambassador Thompson, MCC Resident Country Director Francisco, and Bisht assured that the remaining work would be completed soon as the Nepal government has declared the projects as among “national pride projects” and there is a strong political and administrative commitment in Nepal.

Speaking at Friday’s event, Ram Prasad Ghimire, secretary at the Ministry of Finance and MCA-Nepal board chair, said, “Along with the signing of contracts worth $126 million for three substations, this 18 km transmission line project is set to play an important role in helping Nepal achieve its domestic power goals and reinforcing its position in the regional energy market.”

In recent years, large-scale projects in Nepal have been facing various challenges including delays in land acquisition, procurement hurdles, protests by locals and affected communities, environmental concerns, difficulties in coordination among government agencies, managing public perception about projects, issues of social impact, financial management, and transparency, among others.

“Today marks the first anniversary of the Millennium Challenge Corporation (MCC) Nepal Compact. Over the past year, we have celebrated significant milestones, including the signing of contracts for three substations across Nepal and the completion of a two-year livelihood restoration project to empower communities affected by the project,” Ambassador Thomposn wrote on X on Friday.

“Today, we added to these achievements with the signing of the 18 km cross-border transmission line construction contract worth $12.36 million. The MCC Nepal Compact is a vital part of the 77 years of friendship between the United States of America and Nepal. We are excited about the progress we have made together and look forward to [ literally] paving the way to powering a brighter [and greener] energy and transportation future of 21st century Nepal,” the US ambassador wrote.

According to MCA Nepal, in the past year, it awarded and signed contracts worth approximately $126 million for constructing three 400 kV GIS substations at three locations—in Nawalparasi West, Nuwakot, and Tanahun—from May to July 2024. The New Damauli Substation and the Ratmate Substation will each have a capacity of 1,000 MVA, making them the largest substations in the country.

Similarly, a two-year $1 million livelihood restoration programme for 270 project-affected people by Ratmate Substation concluded on 30 May.

NEA Managing Director Kul Man Ghising, speaking at the contract signing event, stated that this 18-km segment is not just a construction project; it’s a critical link that will enhance Nepal’s energy infrastructure and deepen cross-border energy cooperation with India. He said this accomplishment reflects the strategic foresight and dedication of all involved.

Besides expanding the cross-border and domestic transmission lines, another project under the MCC is road maintenance, whose initial environmental examination (IEE) report for works on the 40 km road segment from Dhan Khola to Lamahi on the East-West Highway has been approved.

The MCA-Nepal plans to launch the procurement of road maintenance works using Full Depth Reclamation (FDR) technology as soon as possible this year, MCA-Nepal said.

MCC Resident Country Director Francisco said, “The successful contracting of the 18 km cross-border transmission line marks a major milestone in our shared journey to transform Nepal’s energy landscape and economic future. This achievement is one of many successes of the MCC Nepal Compact in the past year, but it is particularly significant as it paves the way for the larger 297 km transmission line project.”