Kathmandu- The Millennium Challenge Corporation (MCC) has increased its grant to Nepal by 50 million US dollars (about 6.85 billion rupees).

The MCC is increasing the grant to cover the increased costs due to delays in the implementation of projects funded by the MCC .

The MCC has already informed the US Congress on December 18 about its intention to increase grant assistance to Nepal.

The MCC has informed the US Congress about amending the agreement (compact) between the US and Nepal to provide additional funds not exceeding 50 million dollars to meet the resource shortage for the construction of transmission lines and to support the achievement of the goals of the MCC Compact.

The Finance Ministry source also said that the MCC is going to increase grant assistance. “In view of the increased cost of the projects to be built under the grant, the MCC has initiated the process of providing an additional grant of up to $50 million,” said a senior official of the Ministry of Finance. “Once they approve it, we will initiate the process for the Nepalese government to accept the grant.”

After the MCC increased the grant by $50 million, a total of $747 million will be invested in the implementation of the projects under this.

On 29 Bhadra 2074 BS, an agreement (compact) was signed between the Nepalese government and the MCC to build transmission lines and road infrastructure.

At that time, it was mentioned that the MCC would provide a grant of $500 million to Nepal. However, due to a long-standing political dispute in Nepal over the implementation of that agreement, it took more than 4 and a half years for the Nepalese Parliament to approve the compact.

The MCC Compact was approved by the Nepalese Parliament with an explanatory declaration only on 15 Falgun 2078. And, 6 years after the agreement was signed, the MCC project has been implemented since 13 Bhadra 2080.

MCA Nepal had started the contract process for the transmission line on November 28, 2022. However, after the lowest bid was 60 percent more expensive than the cost estimate, MCA Nepal canceled the contract process and invited bids again for the second time.

However, the government of Nepal, MCA Nepal and MCC have accepted that the project cost may increase due to major obstacles in the global situation during the 6 years between the MCC agreement and the start of implementation (entry into force), and the government of Nepal, MCA Nepal and MCC have accepted that the project cost may increase, so the grant had to be increased, according to the notification submitted by MCC to Congress.

After canceling the old contract for the transmission line, MCC has invited new bids by changing the design and adopting other measures to reduce the cost. MCC has stated that the grant has been increased so that the bids invited this time do not have to be cancelled again due to cost and so that MCA Nepal can sign the contract on time and proceed with the project implementation without further delay.

The MCC said the additional grant will also help adjust for cost fluctuations and meet incidental expenses during the implementation of the compact.

The Nepalese government had initially agreed to contribute $130 million to implement the MCC project. However, as the cost of the MCC project increased, Nepal has committed to increase the investment by an additional $67 million in May 2023. This brings the total contribution by Nepal to $197 million.

315 kilometers of 400 kV transmission lines and three 400 kV substations will be constructed according to the MCC project plan.

Among the projects to be built under the MCC, three substations and an 18-kilometer transmission line from New Butwal to the Indian border have been taken forward.

The remaining 297 kilometers of transmission line have been re-bid, while the 77-kilometer road repair project from Bhaluwang to Shivakhola in Dang is yet to be bid.