MCC gets green light in Nepal


Five years after Nepal signed the US-funded Millennium Challenge Corporation (MCC) compact in 2017, Parliament on Sunday finally ratified the $500 million grant for much-needed transmission lines to distribute and export power.

Key leaders from the Maoists, including Narayan Kaji Shrestha, Giriraj Mani Pokhrel, Krishna Bahadur Mahara, Dev Gurung and Leela Mani Pokhrel maintained their opposition until the last minute, as did leaders like Jhala Nath Khanal from the Unified Socialists, who said he would not participate in the vote.

Gagan Thapa of the Nepali Congress in his address offered blistering criticism of those who were opposed to the project, calling out former prime ministers present in Parliament for their duplicity. 

“Those who call us traitors for wanting to move forward with the project now need to point their fingers at themselves, and reflect on their own words and actions during their leadership,” said Thapa, alluding to leaders of Nepal’s Communist parties. 

Janata Samajwadi Party (JSP) leader Baburam Bhattarai during his remarks also addressed opponents of the project, saying, “Those leaders should have the courage to admit they were wrong for opposing the project in the past, and then retire from politics."

Parliament vote followed a meeting of the five-party coalition held at the Prime Minister’s residence in Baluwatar on Sunday morning, which finally decided to endorse the agreement after months of back-and-forth mainly by the Maoist Centre and the Unified Socialists of the that had threatened to dismantle the governing alliance. 

Party leaders Pushpa Kamal Dahal and Madhav Kumar Nepal agreed to support ratification on the condition that it be accompanied by an ‘interpretative declaration’ addressing concerns about the project.

Gagan Thapa, Maoist leader Shakti Basnet and Unified Socialist-affiliated lawyer Govinda Bandi were tasked to mediate and prepare the declaration. 

Party insiders said that the Unified Socialists were forced to vote in favour of the compact after Prime Minister Sher Bahadur Deuba explored the possibility of forming an alliance with the UML to mobilise support for the project.

KP Oli of the opposition UML for his part had maintained that he would support the MCC only if the NC left the coalition, a demand that was critical for elections this year

The interpretative declaration is meant to assuage the Maoists and Unified Socialists concerns about articles included in the Compact, which leaders of the two parties had repeatedly said is against Nepal’s national interest, and superseded Nepal’s laws, sovereignty, and the Constitution.

The interpretative deceleration addresses concerns of the Communists and was drafted by Thapa and will be appended to the ratification. It states that Nepal does not consider itself to be bound by any strategic, military or security alliance of the US, including its Indo-Pacific Strategy, and that Nepal is not obliged to comply with existing or future US laws or policies for any purpose other than the use of grants.

The declaration also states that project related activities will be regulated by the laws of Nepal, and that Nepal will own all intellectual, movable and immovable property created under the Compact.

The declaration stipulates all activities and funds of Nepal be audited by Nepal’s Auditor General. Another point states that Nepal can reject the grant amount by giving thirty days prior written notice if Nepal’s laws are violated.

But even as the declaration seems to have kept the governing coalition intact and ratified the MCC, experts have questioned the validity of such a document.

"One country does not have the sole right to make explanatory comments on an agreement that was formed between two countries, and doing so could be seen as a coercion,” says constitutional expert Bipin Adhikari. "It would have been better to pass a resolution.”

Others have called the document redundant, and that it is merely a face-saving exercise for the Maoists and Unified Socialist leadership.

“Nepal’s political leaders spread misconceptions about the MCC among the public in the past to such a degree, and have had to backtrack now,” former Supreme Court Justice Girish Chandra Lal told Himalkhabar, “Now, they find themselves in a position of having to save face in front of their party workers.”

The much delayed infrastructure grant project was presented in Parliament members for deliberation over the Compact in the afternoon, and a verbal vote was conducted late on Sunday night.

Discussions regarding the project took place even as the main opposition UML stood in protest in front of the rostrum upholding their demand that Unified Socialist MPs be expelled, having gotten up from their seats as soon as Speaker Agni Sapkota began his opening remarks while anti-MCC protesters clashed with police outside Parliament.

Even before and while Parliament voted, organised protests against the MCC had been going on all day in the streets outside as police used water cannons against brick throwers at the barricades.

Most of the $500 million grant is earmarked for the Kathmandu-Hetauda-Butwal 400kVA transmission line to distribute electricity from existing and new hydropower plants in central and eastern Nepal, and also connect to a high-capacity line to Gorakhpur so Nepal can sell surplus monsoon electricity to India.

Nepal is currently generating 2,000MW of hydroelectricity with an additional 2,500MW under construction. This figure will soar to 7,300MW by 2025 as per Nepal Electricity Authority (NEA) estimates. The country stands to lose Rs142 billion annually without transmission lines to evacuate surplus electricity. 

Following the endorsement of the grant, the US Embassy Nepal released a press statement where it says that the decision whether to ratify the compact always rested with the Government of Nepal which will will now be able to continue to work towards implementing the five-year program.

"Today's decision by Parliament to follow through on its signed commitment and ratify the compact will mean more jobs for the Nepali people, a reliable supply of electricity, and lower transportation costs," it reads.

"The United States’ relationship with Nepal is broader than one agreement and we will continue to support the country and its democratic values and long-term economic prosperity."

Shristi Karki


Shristi Karki is a correspondent with Nepali Times. She joined Nepali Times as an intern in 2020, becoming a part of the newsroom full-time after graduating from Kathmandu University School of Arts. Karki has reported on politics, current affairs, art and culture.

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