Feasibility studies of MCC projects to be completed within January

- Post Report, Kathmandu

Nov 5, 2016-

The feasibility studies of energy and roads projects that will be built or maintained using funds provided by the US government will be completed within January, according to Himesh Dhungel, country director (Nepal) of Millennium Challenge Corporation (MCC), an independent US government agency working to reduce global poverty through economic development.

Ever since December 2014, when the MCC board of directors selected Nepal for the US government’s compact programme, the Nepal government and the MCC have been scouting projects that can provide highest economic rate of return and reduce the poverty level in Nepal.

These studies concluded that the US government’s support should go towards development of energy and transport sectors, as shortage of energy infrastructure and shoddy road networks had been working as major binding constraints for Nepal’s economic development. 

Since then, the Office of the Millennium Challenge Nepal, a government team dedicated to develop the compact programme, has shortlisted eight energy projects, whose feasibility studies are currently being conducted. 

These projects are: 400kV East-West transmission backbone, and 220kV Inaruwa-Ilam, 220kV Likhu-Khimti and 220kV Tadhekani-Kusma transmission lines. 

Also, feasibility studies of upgrading Dhalkebar-Hetauda transmission line, developing a substation at Lamki, installing second circuit on 132kV Balanch-Ataria transmission line, and developing a section of 400kV Butwal-Gorakhpur cross-border transmission line that falls in Nepali territory are being conducted. 

“We selected these projects after going through the transmission masterplan prepared recently by the government,” Dhungel told journalists on Friday.

Unlike in the case of the energy sector, the roads sector, however, could not justify funding needs for construction of new road networks. 

“The government did propose some new road projects, but the selections were made without conducting any research,” Dhungel said. “So, the government could not exactly say how development of these projects would help in economic development.”

It is well known that lots of development partners have extended funds to build new roads in the country. “But the area where Nepal is not doing well is maintaining assets it already has. And very few donors are putting money there, which is creating a gap,” Dhungel said. 

This funding gap in repair and maintenance is “increasing transport cost because vehicles have to be repaired early” and raising road “safety” issues, Dhungel added, justifying the reason for choosing to extend funds for road maintenance over construction of new road networks. “We have already asked the government to give us a list of 2,000 km of roads that need to be maintained. We will now select roads that are of strategic importance and bring the [length] down to 200 km to 400 km,” said Dhungel, adding, “Funds will also be invested to evaluate and improve the performance-based maintenance contracting regime, Road Board and financing regime of road maintenance.”

However, the decision to fund all the projects-both roads and energy-will be based on outcome of the feasibility study, MCC funding availability, government commitment for institutional reform and assurance that these projects can be completed within five-year period from the time of their implementation, Dhungel informed.

Once the projects are finalised, they will be forwarded to the MCC board, after which the Nepal government and the MCC will sign the compact agreement. 

“The signing will probably take place by the end of September,” Dhungel said.

Once the deal is sealed, the government and the MCC will fix a date to roll out the projects. “All projects must be completed within five years of their implementation date, otherwise the funds will go back to the US, and the government will have to finish those projects on its own,” said Dhungel. “Funds for these projects will be released every quarter and payments will be made directly to contractors who implement the projects.” 

This means the funds handed over by the US will not enter the Government’s coffers. MCC’s compacts-agreements between the MCC and the country that receives the fund-provides grants in the range of US$66 million to $698 million to a country for a five-year period

However, the average size of grant, so far, has hovered around $300 million to $350 million, according to Dhungel.

Nepal fails in four indicators

KATHMANDU: Nepal failed in four out of 20 indicators in the US government’s Millennium Challenge Corporation (MCC) scorecard for this year, signalling no improvement in the country’s performance over the last one year. Last year too, Nepal passed in 16 out of 20 indicators, says the latest MCC scorecard, which consolidates a country’s scores for each of the policy indicators MCC uses to determine eligibility for its assistance programme. This year, the MCC created scorecards for 82 countries, of which 33 passed while 49 failed. Nepal’s performance did not improve 

this year as it could not perform as well as comparable countries in the Government Effectiveness indicator, largely because of its failure to provide adequate infrastructure services and bureaucracy’s inability to withstand political pressure, said MCC Country Director Himesh Dhungel. (PR)

Published: 05-11-2016 08:03

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