The abrupt cancellation of contract processes related to the construction of a 400 kV power transmission line, financed by the Millennium Challenge Corporation (MCC), has triggered confusion regarding the next steps and timelines for this vital project.

The Millennium Challenge Account Nepal Development Committee (MCA-Nepal) issued an official notice on October 13, announcing the cancellation of contracts in various phases, including Lot-10 (Lapsiphedi-Ratemate-New Hetauda), Lot-2 (Ratemate-New Damauli), and Lot-3 (New Butwal-Nepal-India border area). This decision stemmed from bids surpassing the initial cost estimates, leaving uncertainty about how the re-tendering process for this 315-kilometer power transmission line will proceed.

MCA-Nepal has responded to inquiries about the continuation and future steps for the canceled contracts by revealing ongoing efforts to formulate a plan for the upcoming contract procedures. They emphasized, "MCA-Nepal is actively collaborating with technical experts, the MCC, and the Nepal government to ensure a successful procurement process. This collaborative approach aims to ensure the timely and budget-conscious construction of the transmission line, in adherence to the environmental and social standards outlined by MCA-Nepal and MCC, reflecting Nepal's unwavering commitment to the project's success."

Although MCA-Nepal maintains its commitment to completing the project within the specified timeframe and budget, the contract process continues to be marred by uncertainty. Notably, it took approximately 11 months from the initial contract invitation to evaluation and subsequent cancellation. The precise duration for completing the next contract process remains undisclosed, but MCA-Nepal insists that the project will meet the five-year deadline.

The agreement between the Ministry of Finance and the MCC, signed on September 14, 2017, received parliamentary approval on February 27, 2022, ushering it into the Entry Into Force (EIF) stage, set to be fully executed from September 30. This marks the commencement of the five-year period for project construction under the MCC Compact.

The MCC agreement, six years in the making, has reached the stage of implementation. However, uncertainties arise due to concerns that a contract extension could jeopardize timely execution and potential MCC grant disbursement to Nepal. Additionally, some prerequisites for implementing the project, such as compensation distribution, land use rights within forest areas, and project area accessibility, are yet to be fulfilled.

Furthermore, Nepal's financial responsibility in the project has increased. Originally estimated at $630 million, the total cost of the MCC project has risen to $697 million, with the Nepali government's contribution increasing from $130 million to $197 million after a supplementary agreement last May. Nepal's responsibility in the project's overall expenditure now stands at 28.26 percent, compared to the earlier 20.63 percent, amounting to approximately NPR nine billion.

The government has allocated a budget of NPR 10.84 billion for the current fiscal year to be disbursed for projects under the MCC. Of this, NPR 8.77 billion has been earmarked for the electricity transmission project, NPR 1.5 billion for road maintenance, NPR 2.1 million for monitoring and evaluation, and NPR 55.54 million for program administration. These allocations underline the importance and scale of the MCC-funded projects in Nepal.