Nepal has received a $1 million grant from the Asian Infrastructure Investment Bank (AIIB) to upgrade its electricity transmission and distribution system under the Power Distribution System Upgrade and Expansion Project which will be implemented by the Nepal Electricity Authority (NEA).

The Finance Ministry signed a memorandum of understanding with the China-based multilateral lender on the sidelines of the third AIIB annual meeting being held in Mumbai. Shree Krishna Nepal, chief of the International Economic Cooperation Coordination Division of the Finance Ministry, and a representative of the AIIB on Monday signed the accord on behalf of their respective organizations.

Nepal received the grant under the project preparation special fund created by the AIIB to support and facilitate the preparation of projects that will be financed by the multilateral lender in the future. The grants are given to projects for which member countries have asked for financial assistance from the AIIB. As projects for which grants have been provided are likely to be approved by the AIIB board, the Power Distribution System Upgrade and Expansion Project

will probably receive a $100 million loan as requested by Nepal.  

According to the AIIB, the proposed project is designed to increase access to electricity and reduce distribution system losses in the western and far western regions of Nepal.

“The purpose of this grant is to enhance the quality of project preparation through financing preparatory activities, such as feasibility study, environment and social assessment and procurement support,” the bank said on its website. “The project preparation grant will also help prioritize investment areas, prepare context-sensitive engineering design appropriate for geographical and demographic characteristics of each district, and ensure readiness of the project for implementation.”

This is the second such grant provided to Nepal. Last November, the Urban Infrastructure Investment Project received a $1 million grant for project preparation.

The objective of the proposed project is to improve the provision and quality of key infrastructure and basic services in the participating municipalities of Nepal’s Tarai region, and the purpose of the grant is to conduct preparatory activities to help prioritize investment projects within target municipalities, finalize important design features, and ensure readiness of the project for implementation. The government is seeking a $76 million loan from the AIIB to execute the project.

Apart from these two projects, the government has submitted proposals for three projects for AIIB financing. They are Sharada-Babai Hydropower Project (a storage type project planned to be built on the Babai and Sharada rivers), Pokhara-Beni Jomsom Road Upgrading and Samakhusi-Tokha-Chhahare Road Upgrading and Extension Project.