Laxmi Capital News
$500m US grant likely to enter Nepal from Sept 2019

Nepal will be able to utilise $500 million grantpledged by a US government agency beginning September 2019 if it is able to laythe necessary groundwork for release of the fund, a senior US official saidtoday.

TheMillennium Challenge Corporation (MCC), an independent US government agencyworking to reduce global poverty through economic development, had formallyagreed to provide grant assistance of $500 million to Nepal last September. Thegrant assistance, which is the single biggest provided by a bilateral donor toNepal, will be used to strengthen the country’s energy and transport network,which is crucial to attract domestic and foreign investment, stimulate economicgrowth and reduce poverty.

“The grantwill be released on a quarterly basis beginning September 2019, if NepaliParliament is able to ratify the agreement signed between Nepal government andMCC last September,” said a senior MCC official on condition of anonymity.Another important milestone that Nepal has to reach to tap the US fund isfinalise the modality for construction of 400kV Nepal-India Butwal-Gorakhpurelectricity transmission line, according to the official.

Nepal andIndia are currently scouting ways to build the cross-border transmission line,but have not reached a conclusion yet. Once the agreement is reached, the MCCwill provide necessary fund to build the segment of the transmission line,which falls in Nepali territory.

“We hope thedeal will be finalised soon, so that the (Nepal-US MCC) agreement could enterinto force, paving the way for gradual release of the pledged grant,” said theofficial. The grant pledged by the US is a part of the $630-million ‘compactprogramme’ designed by the MCC for Nepal. Nepal has expressed commitment tocontribute $130 million to the programme, which is the single largest up-frontcountry contribution in MCC’s history.

Nepal willuse the biggest chunk of grant, or $520 million, to build three powersubstations and 400kV transmission lines stretching 300 km from east to west ofthe country. Another $55 million will be used for maintenance and upgradationof 305-km road segments. The remaining amount will be used to monitor andevaluate performance of projects that are under implementation and coveradministrative cost. These investments will benefit about 23 million people inNepal, according to the MCC.

To implementthe compact programme, the government, in April, endorsed an ‘order’ toestablish the Millennium Challenge Account (MCA), the MCC programmeimplementing agency. “This is a significant progress,” said the MCC official,adding, “The MCA will not favour US contractors or consultants during the timeof awarding contracts.”

The MCAcomprises a board of directors headed by the finance secretary. It willcomprise officials of the Ministry of Energy, the Ministry of PhysicalInfrastructure and Transport, Nepal Electricity Authority, MCA CEO andrepresentatives of the private sector and the civil society. The MCA will alsohave a technical unit, which will comprise experts of different sectors relatedto the projects that will be rolled out.

“The MCAwill prepare engineering design of the proposed transmission lines and conductenvironmental impact assessments in coverage areas of the transmission lines.These works must be completed before the MCC agreement enters into force,”another MCC official said. The MCC follows environmental and social performancestandards of the International Finance Corporation, a private sector arm of theWorld Bank, to manage environmental and social risks. The MCA will also overseeacquisition of land and right-of-way required for transmission lines, theofficial informed. “We expect considerable progress in this area by the timethe MCC agreement enters into force.”

This is anambitious target for Nepal, which takes years to acquire land for projects.“But with support from everyone, we know we can achieve these goals,” the MCCofficial said.

All projectsunder MCC must be completed within five years of enforcement of the agreement.Otherwise, the fund will go back to the US.

Source: The HimalayanTimes, 26th May 2018

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