The government has decided to accept the grant assistance of Rs 51.38 billion ($500 million) to be received from the US Millennium Challenge Corporation (MCC) for road maintenance and transmission line projects.
A cabinet meeting held at Office of the Prime Minister and Council of Ministers in Singha Durbar today has decided to accept the biggest foreign grant amount in its history, under the 'compact programme' pledged by the Millennium Challenge Corporation (MCC) of the US government.
The Millennium Challenge Corporation (MCC) is an independent US government agency working to reduce global poverty through economic development. This is the first grant that the country is receiving through MCC.
Under the compact programme, the MCC will invest up to Rs 51.38 billion ($500 million) via grant while the government will contribute an additional Rs 12.88 billion ($130 million) to raise the total fund to Rs 64.26 billion (US$ 630 million).
The cabinet approval will pave way for its voting by MCC’s board of directors and the US Congress for approval. "The final grant agreement is likely to be signed by September," according to MCC’s regional deputy vice president for Europe, Asia, the Pacific and Latin America Fatema Z Sumar, who visited Kathmandu last week to finalise the deal. Once the final deal is sealed, the government and the MCC will fix a date to roll out the projects as the MCC compact is a funding scheme that requires the recipient country to complete the projects ‘on time and on budget’.
"Once the deal is signed, the government will have to finalise all issues related to land acquisition, introduce regulatory reforms, including passage of the Electricity Regulatory Commission, and take other key steps that will be required to complete the projects in five-year period,” she said, adding that the project related to the energy sector is expected to have an impact on at least 72 per cent of the households currently connected to the grid, while maintenance works on around 300 km of road segments will benefit 205,000 households across the country. "The assistance is for a five-year compact fund that has no time overrun in the project execution once the project kicks off."
The compact proposal seeks to address these constraints by investing in an Electricity Transmission Project (ETP) and a Road Maintenance Project (RMP). ETP would transform power sector by expanding and strengthening the high voltage electricity transmission network to support new investments in generation and allow greater cross-border electricity trade. The RMP is expected to improve the road maintenance regime in Nepal and complement existing efforts to build new roads by other parties.
Around 300-km transmission line under ETP at a total cost of $400 million and 305-km road under RMP will be developed at a total cost of $52 million, according to the MCC. The grant will be utilised for maintenance of roads of a cumulative length of 305-km, which includes the Charali to Phidim, Dharan to Basantapur, Kadmaha (Lahan) to Gaighat, Hetauda to Bhimphedi, and Amiliya to Salyan Bazar sections.
Likewise, the transmission line projects include construction of total 300-km of line, from Hetauda to Butwal via Naubise and Damauli, and construction of three substations, one each at Naubise, Damauli and Butwal. The transmission line component also includes cross-border transmission line of Butwal-Gorakhpur, which aims at facilitating energy exchange with India.
The signing of the MCC compact funding coincides with the celebration of 70 years of US-Nepal friendship. Nepal is the only recipient of the MCC compact assistance in South Asia.
Following Nepal’s strong performance on the MCC policy indicators like economic freedom, rule of law, and control of corruption, Nepal was selected as the eligible country to develop the compact in December 2014.
The Office of the Millennium Challenge Nepal (OMCN) – a government office which coordinates development of the MCC programme – has finalised the projects in coordination with MCC that are going to be implemented under the MCC grant.
The MCC had selected Nepal for a smaller threshold programme in December of 2011. The MCC and the government of Nepal had analysed constraints to economic growth and jointly prepared a policy improvement programme based on the results. Given Nepal’s strong performance in its MCC policy indicator scorecard through 2014, MCC’s board of directors selected Nepal as being eligible to develop a compact, a larger grant-based investment.
A cabinet meeting held at Office of the Prime Minister and Council of Ministers in Singha Durbar today has decided to accept the biggest foreign grant amount in its history, under the 'compact programme' pledged by the Millennium Challenge Corporation (MCC) of the US government.
The Millennium Challenge Corporation (MCC) is an independent US government agency working to reduce global poverty through economic development. This is the first grant that the country is receiving through MCC.
Under the compact programme, the MCC will invest up to Rs 51.38 billion ($500 million) via grant while the government will contribute an additional Rs 12.88 billion ($130 million) to raise the total fund to Rs 64.26 billion (US$ 630 million).
The cabinet approval will pave way for its voting by MCC’s board of directors and the US Congress for approval. "The final grant agreement is likely to be signed by September," according to MCC’s regional deputy vice president for Europe, Asia, the Pacific and Latin America Fatema Z Sumar, who visited Kathmandu last week to finalise the deal. Once the final deal is sealed, the government and the MCC will fix a date to roll out the projects as the MCC compact is a funding scheme that requires the recipient country to complete the projects ‘on time and on budget’.
"Once the deal is signed, the government will have to finalise all issues related to land acquisition, introduce regulatory reforms, including passage of the Electricity Regulatory Commission, and take other key steps that will be required to complete the projects in five-year period,” she said, adding that the project related to the energy sector is expected to have an impact on at least 72 per cent of the households currently connected to the grid, while maintenance works on around 300 km of road segments will benefit 205,000 households across the country. "The assistance is for a five-year compact fund that has no time overrun in the project execution once the project kicks off."
The compact proposal seeks to address these constraints by investing in an Electricity Transmission Project (ETP) and a Road Maintenance Project (RMP). ETP would transform power sector by expanding and strengthening the high voltage electricity transmission network to support new investments in generation and allow greater cross-border electricity trade. The RMP is expected to improve the road maintenance regime in Nepal and complement existing efforts to build new roads by other parties.
Around 300-km transmission line under ETP at a total cost of $400 million and 305-km road under RMP will be developed at a total cost of $52 million, according to the MCC. The grant will be utilised for maintenance of roads of a cumulative length of 305-km, which includes the Charali to Phidim, Dharan to Basantapur, Kadmaha (Lahan) to Gaighat, Hetauda to Bhimphedi, and Amiliya to Salyan Bazar sections.
Likewise, the transmission line projects include construction of total 300-km of line, from Hetauda to Butwal via Naubise and Damauli, and construction of three substations, one each at Naubise, Damauli and Butwal. The transmission line component also includes cross-border transmission line of Butwal-Gorakhpur, which aims at facilitating energy exchange with India.
The signing of the MCC compact funding coincides with the celebration of 70 years of US-Nepal friendship. Nepal is the only recipient of the MCC compact assistance in South Asia.
Following Nepal’s strong performance on the MCC policy indicators like economic freedom, rule of law, and control of corruption, Nepal was selected as the eligible country to develop the compact in December 2014.
The Office of the Millennium Challenge Nepal (OMCN) – a government office which coordinates development of the MCC programme – has finalised the projects in coordination with MCC that are going to be implemented under the MCC grant.
The MCC had selected Nepal for a smaller threshold programme in December of 2011. The MCC and the government of Nepal had analysed constraints to economic growth and jointly prepared a policy improvement programme based on the results. Given Nepal’s strong performance in its MCC policy indicator scorecard through 2014, MCC’s board of directors selected Nepal as being eligible to develop a compact, a larger grant-based investment.
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