The deal-breaker

The date for local elections is now set in stone: 13 May to be held at once all over the country. But the path to voting booths is a political minefield.

The five-party governing coalition is split right down the middle between the supporters and opponents of the American-funded Millennium Challenge Corporation (MCC) project. Prime Minister Sher Bahadur Deuba’s Nepali Congress (NC) and the JSP are for it, while the Maoist Centre and the Unified Socialists are against.

But neither side has the numbers if the MCC’s ratification is put to the vote in Parliament. They would both need the UML, which has been playing coy in the opposition even though its leader K P Oli had backed it when he was prime minister.

There are no permanent foes and permanent friends in politics, and this is most evident at election time. In 2017, the Maoists forged an electoral alliance with the UML and swept the elections, but they failed to make good use of the two-thirds majority and spent the better part of the last four years bickering. One of the reasons for the split was Pushpa Kamal Dahal and Madhav Kumar Nepal using the MCC to bring down Oli.

Read also: Nepal House speaker embroiled in MCC row, Nepal Times

It eventually led to the Communist alliance breaking up into Oli’s UML, Dahal’s Maoist Centre (MC) and Nepal’s Unified Socialists (US). And now, the American project threatens to split the governing coalition too.

The MCC is now all mixed up with domestic election politics, and geo-strategic rivalry between the United States and China. Dahal’s MC and Nepal’s US, are both offshoots of a bigger party and are unsure of their electoral prospects if the coalition breaks. But if it does they can whip up the MCC as an election issue against Deuba and Oli.

The NC is divided about an electoral alliance with coalition partners. Prime Minister Deuba wants to pass the MCC and hold the coalition together, but powerful NC figures want to field elections for all three levels on their own. The opposition UML has a strong local base, but will not be opposed to an alliance if it can garner more seats.

Read also: MCC: damned if we do, damned if we don't, Nepali Times

This is why the MCC can be a deal-maker or deal-breaker. Only Deuba’s NC and JSP in the governing coalition are for the $500 million infrastructure project. Even within the JSP, Baburam Bhattarai and Upendra Yadav seem to have opposing views, with the former prime minister publicly supporting the grant. The Americans are piling on the pressure, saying they will wait till the 28 February cutoff date for House ratification, failing which they will pull out.

Dahal and Nepal on the other hand, seem to be under Beijing’s spell. They have held several virtual meetings with top officials of the Communist Party of China who regard the MCC as a US strategic response to their own Belt Road Initiative (BRI).

The media leak this week of a letter to the MCC co-signed by Deuba and Dahal dated 29 September 2021 has put the Maoist leader in hot water. Dahal was assuring Washington that he would work to form a consensus in the coalition, all the while opposing the MCC at home.

Read also: The cost of no MCC, Nepali Times

Parliament needs to sit for a ratification vote, but the House has not had a proper session for six months. Oli has been blocking House proceedings because Speaker Agni Sapkota has not evicted breakaway members of the Unified Socialists. And Sapkota, who is a close Dahal confidante, once more pushed a Parliament session slated for 9 February by a week.

This gives Deuba more time to cobble together numbers in the House for ratification before the American deadline. If Dahal and Nepal do not go along, he will have to get the UML on board – and that means the collapse of the coalition.

In fact, the MCC has now become a bargaining chip for both the UML and the Maoist-Unified Socialists to use against Deuba. But the prime minister knows that Dahal and Nepal need an electoral alliance with him more than he needs them. The Maoists are said not to even have enough candidates to field in local government elections in May.

Meanwhile, fringe Communist parties including the Netra Bikram Chand faction of the Maoists have resumed anti-MCC protests outside Parliament. And Mahanta Thakur of the smaller LSP is making an unrealistic bid for local elections to be postponed in Madhes Province by three months.

The $500 million MCC compact will be used primarily to upgrade transmission lines 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.

The cost of no MCC equals a loss of Rs142 billion a year for Nepal by 2025 when generation capacity is expected to rise four-fold to 5,000MW. Much of it risks being wasted without the transmission lines to evacuate power.

Read more:

China lobbying against MCC, Ramesh Kumar

Missing links in Nepal's MCC debate, Jeevan R Sharma and David Seddon

American lobbying for MCC went into high gear on thursday when US Assistant Secretary of State Donald Lu called Prime Minister Deuba, Dahal and Oli separately to warn that the US would recalibrate its relations with Nepal if they failed to ratify the compact.

This followed a slew of visits by high-ranking MCC officials to Nepal in October-November last year to warn Nepal that the MCC contract was timebound.

Lu is also reported to have a key message to all three leaders: failure to ratify the MCC would be seen in Washington as Nepal buckling under Chinese pressure. Left unsaid in that warning was that Nepal may have to face a similar predicament to Sri Lanka, which has faced ostracisation after rejecting its own MCC project that has led to the country sinking into a deep economic crisis.