Kathmandu, Sept. 2
In a country where sick projects requiring continuous time
and cost over-run have shadowed the overall infrastructure development
environment, a mega infrastructure project worth US$ 697 million (Rs. 92
billion as per exchange rate of Friday) kicked off on Wednesday with a timeline
to complete within five years.
Finance Minister, Dr. Prakash Sharan Mahat, and MCC Vice
President of Compact Operations, Cameron Alford, exchanged the letter related
to 'Entry into Force' (EIF) to mark the beginning of the project implementation.
The project with the US$ 500 million support from the
Millennium Challenge Corporation of the USA and US$ 197 million contribution
from the Government of Nepal will develop about 315-kilometre 400 KV
transmission line, build three substations and implement road maintenance
project.
While many are expressing doubts over the performance of the
country in carrying out the project of that scale within five-year period, the
Ministry of Finance (MoF) and implementing agency MCA-Nepal have expressed
confidence to make it a reality.
To cite some examples, 456 MW Upper Tamakoshi Hydroelectricity
Project cost about Rs. 89 billion, almost double the initial estimation, and
completed in 10 years. Likewise, Melamchi Water Supply Project is still in
implementation phase after 21 years from the commencement date. Babai
Irrigation Project's cost has escalated to above Rs. 18 billion from its
initial cost of about Rs. 2 billion. Most of the national pride projects are
sick and witnessing poor financial as well as physical progress.
Therefore, to carry out all the preparations and development
work related to the projects, the government formed Millennium Challenge
Account (MCA) Nepal about seven years ago through a Ministry of Finance-level
Millennium Challenge Account Nepal Development Committee (Formation) Order,
2074.
As per the agreement signed with the MCC in 2017, Nepal had
to meet six criteria – declaring the Electricity Transmission Project (ETP) as
a national pride project, establishing Electricity Regulatory Commission (ERC),
signing Project Implementation Agreement (PIA), signing agreement with India
for the cross-border transmission line, ratifying the Compact by the
parliament, and completing land acquisition and forest clearance.
According to the MCA-Nepal, the country has met all
conditions except the site access work as the land acquisition is still in
progress in two districts.
"There has been a significant progress in land
acquisition. It will take about three months to finalise the bids for the
contract to develop the projects. By then, project site access would be
completed," informed the MCA-Nepal.
MCA-Nepal's board of directors is chaired by the secretary
of the MoF and includes joint-secretaries from the Energy Ministry and
Infrastructure Ministry, executive director of Nepal Electricity Authority, one
representative each from civil society and private sector, and executive
director of the MCA.
This team is responsible for
project management, supervision and implemantaiton, approving annual budget and
programmes of the MCA-Nepal, devising policies, signing project agreement with
other agencies and managing resources.
Deliverables of MCC grant
The MCC has provided support to 51 countries so far and some
have completed the threshold programme and compact support, and have received
the second phase of contact support in infrastructure and economic development.
The project will develop a high-powered cross-border
transmission line from Lapsephedi and Hetaunda, Kathmandu, Nuwakot, Damauli,
Butwal to Gorakhpur of India. By 2030, country's electricity generation would reach
about 10,000 MW and some of the major electricity projects are in the region
through which the transmission lines will pass.
"Nepal's energy generation will be about 7,000 MW by
2026 but domestic demand will not exceed 5,000 MW even by 2030. Therefore, we
need a strong infrastructure to export the generated power," said Ashish
Garg, Vice President of the Independent Power Producers' Association Nepal
(IPPAN). He also maintained that the 5,000 MW estimated consumption would be
met if massive industrial development happened here.
Current domestic demand is just 1,800 MW while the total
installed capacity is 2,800 MW.
Similarly, three sub-stations will be constructed in Ratmate
of Nuwakot, Damauli of Tanahun and Butwal of Rupandehi.
Under the road maintenance project, about 100 KM road
section from Chandrauta of Kapilvastu to Shiva Khola of Dang will be upgraded.
However, this is a small part of the overall grant support of the MCC. Only US$
52 million would be used in road maintenance project.
To increase the energy sector reliability and sustainability
of MCC investment, technical assistance has been bundled with the project.
Progress so far
The Ministry of Forest and Environment has approved the
Environmental Impact Assessment that identified the environmental and social
impacts of the ETP and devised mitigation measures in April 2021. The MCA-Nepal
has also finalised the Environment and Social Impact Assessment report as per
the MCC guidelines. It includes plans on critical habitat screening,
biodiversity management, indigenous people development and
trafficking-in-person risk management.
The MCA-Nepal has also completed community consultations,
under which 152 hearings were organised in 30 project-affected municipalities.
According to it, around 400 community consultations have been conducted so far.
Similarly, land acquisition for substations has been
completed. But land acquisition is ongoing in two districts which is expected
to complete within next couple of months. About 104 hectares of land is to be acquired in 10 districts for the
transmission lines.
Meanwhile, two-year livelihood restoration programmes are
underway in Ratmate of Nuwakot. It trains people on high-value agriculture,
vocational skills and job skills including computer and financial literacy.
Largest support for infrastructure
MCC's grant support is the largest foreign grant support for
infrastructure development in Nepal so far. While Nepal has been struggling to
obtain the loan support announced by India in the immediate aftermath of the
2015 earthquake as the southern neighbour forced the conditions that were not
favourable to Nepal's industry and economy, the MCC grant will realise a large
structure within five-year period.
The experts also say that the technology that the project
will transfer in terms of electricity transmission and road maintenance would
help the country in the long run. As the country is graduating to the
developing country status and gearing up for the middle-income nation by 2030,
it needs a massive infrastructure development. Meanwhile, after the graduation,
it will lose the remaining opportunities to receive the grant support and has
to find loan facilities for its development works.
Protest of MCC support
MCC support is a demand-based grant support of the US
government. Nepal had finalised the projects to be developed with the support
and can utilise the financial support for the same projects. The USA will not
dictate Nepal for any instrument of the project implementation.
However, there were rumours in the past couple of years,
especially while the parliament ratified the agreement in 2021. Conspiracy
theorists spread rumours that the US Army would land in Nepal along with the
MCC support and Nepal's sovereignty would be at stake. Some even went as far as
saying that the country would slide into chaos like Afghanistan witnessed and
the US would install ballestic missiles in the hills to attack China.
But the USA, through its embassy in Kathmandu, said that the
MCC-Nepal Compact is a non-military agreement; it does not have any military
components and by U.S. law, MCC funding cannot be used for military assistance
or training. "The MCC-Nepal Compact is not, and never has been, a
deliverable of the Indo-Pacific Strategy," it said.
The USA also clarified that even after parliamentary
ratification, the MCC-Nepal Compact, does not and will not prevail over Nepal’s
constitution.
Unlike the rumours, the money that Nepal receives from the
MCC will be deposited in Nepal's bank and the annual report of the MCA-Nepal
should be submitted to the Finance Ministry. Annual accounts of the project
will be audited by the Auditor General of Nepal. However, the Government of
Nepal and MCC could check it whenever they wanted.
It is also important to note that every political party and
all past prime ministers – Sher Bahadur Deuba, KP Sharma Oli, Pushpa Kamal
Dahal Prachanda (who is the incumbent PM as well), Sushil Koirala and Dr. Baburam
Bhattarai, and chairman of the Council of Ministers during the caretaker
government in 2013 – have furthered the agreement since the country was
selected for the Nepal Threshold Programme of the MCC in 2011.
Published in The Rising Nepal daily on 3 September 2023.
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