The Ministry of Finance has held up a request from the Millennium Challenge Account Nepal (MCA-Nepal) for a one-year extension of US-funded infrastructure projects, with the proposal yet to reach the US government’s Millennium Challenge Corporation (MCC).

MCA-Nepal sent the request to the ministry mid-May, asking it to formally approach MCC headquarters for an extension of the $747 million projects, which include a 315-km transmission line and road upgrade works.

A senior finance ministry official told the Post that they had received a letter on behalf of MCA-Nepal but had not yet been forwarded to MCC headquarters. “It is still under discussion,” the official told the Post, without disclosing why the request had been held up or when it would be sent.

The MCA-Nepal board member said MCA-Nepal sent the request to the Finance Ministry, which serves as the liaison ministry and must formally approach the MCC headquarters on Nepal’s behalf. The finance secretary heads the MCA-Nepal board.

Under the MCC Compact, the projects are supposed to be completed by August 30, 2028. But MCA-Nepal says implementation has been delayed by about 14 months because of the US government’s temporary suspension of MCC operations and the cancellation and re-tendering of contracts for the transmission line.

“Due to some reasons, we have already sought a one-year term extension for the completion of the two projects,” said a senior MCA-Nepal board member who is not authorised to speak to the media.

“It has been three months since MCA-Nepal sent such a request to the finance ministry, but there is no information about the term extension,” the board member said.

Once the finance ministry forwards the request, the MCC headquarters will review the reasons cited by MCA-Nepal and decide whether to grant the extension.

In its letter, MCA-Nepal stated that due to some unavoidable circumstances, including US President Donald Trump’s decision in July 2025 to pause US foreign assistance and halt MCC payments. The suspension put the projects in limbo for several months before the administration decided in July 2025 to allow MCC’s global operations, including in Nepal, to continue.

MCA-Nepal also cited the cancellation of bids in October 2023 for construction of the 315-km 400kV transmission line after all bidders quoted prices substantially above the estimated cost.

Following the cancellation, MCA-Nepal had to restart the bidding process. It took almost nine months to award a fresh contract, an MCA-Nepal official told the Post.

The official said MCC headquarters is positive about the term extension and that a new US law could also facilitate the extension.

“First, the MCC headquarters itself is positive because our reasons are grounded and valid. Second, the Trump administration has introduced a new law that permits a one-year term extension to the projects currently in operation in four countries,” the official said.

MCA-Nepal is a government agency set up to manage the MCC Compact in Nepal.

The five-year compact was signed between the government of Nepal and MCC in September 2017. The US initially committed $500 million in grants, while Nepal agreed to contribute $150 million, which was later jacked up to $197 million. The total investment in two projects has therefore reached $697 million. The MCC board had also agreed to provide an additional $50 million to cover a funding gap, potentially taking the total value of the compact to $747 million.

Dragged into controversy, the compact was ratified by the House of Representatives in February 2022 and entered into force on August 30, 2023.

MCA-Nepal is seeking more time mainly because of delays in getting the projects off the ground. But officials say implementation continues to face problems, especially in the transmission line project.

The road project is progressing smoothly, they said. But the transmission line project has been held up by problems with land acquisition, compensation, construction quality and compliance with environmental rules.

Construction of substations has also raised quality concerns. Many people have yet to receive compensation for their land acquired for the transmission line’s right of way, according to officials. “So far compensation has been distributed for only 18 km of the transmission line’s right of way,” an official told the Post, adding, “How can contractors start work until they get the site clearance?”

“Land acquisition is still facing hurdles and has not been resolved despite a large team and resources being mobilised on the ground,” an official who regularly monitors the MCC projects from both the centre and the field.

“The way compensation is being provided to affected families and land owners under the MCC project could create problems for future transmission line projects. We may not be able to afford similar levels of compensation in other projects,” the official said.