Kathmandu, 3 Jul: The Millennium Challenge Account Nepal Development Committee (MCA Nepal) has welcomed the decision of the U.S. government to temporarily continue the program being implemented in Nepal under the Millennium Challenge Corporation (MCC). MCA Nepal is the implementing agency of the MCC project funded by U.S. assistance.
“MCA Nepal welcomes the U.S. government’s decision to allow the continuation of the implementation of the MCA Nepal Compact under a special exemption amid the suspension of U.S. foreign aid,” the press statement issued by MCA Nepal on Wednesday reads.
The project stated that it has been working closely with the MCC to implement compact-related activities, including the construction of a 297 km electricity transmission line and road maintenance, among others. “MCA Nepal has continued work on three substations and the construction of an 18 km cross-border transmission line, which were already underway before the review of foreign assistance,” the statement said.
Although MCA Nepal issued a statement welcoming the decision to continue the MCC-funded project in Nepal, the U.S. government has not made any new decision in this regard since the beginning of the Nepali month of Asar (specifically Asar 4). On that date (Asar 4), the U.S. Embassy in Nepal issued a notice stating that there had been a positive indication regarding the continuation of the MCC Nepal project.
“The U.S. government had decided in February 2025 to suspend foreign assistance for 90 days. However, an exception was granted for the MCC Nepal Compact,” the embassy’s statement said. “Under this exemption, the MCC Nepal Compact has been authorized to continue full implementation. Even as the U.S. is reviewing all of its foreign aid programs, the continuation of the already-operational MCC project in Nepal is expected.”
MCA Nepal has stated that the project will continue, based on the U.S. Embassy’s statement issued on Asar 4 and the recent disbursement of some funds by the MCC. “MCA Nepal’s management has concluded that the project will continue, taking into account the U.S. Embassy’s statement from Asar 4 and the payments made in the meantime,” a source said. “Accordingly, on Wednesday, the project announced a new procurement notice for road maintenance.”
However, Ministry of Finance spokesperson Shyam Prasad Bhandari stated that they have not received any formal communication regarding the continuation of MCA Nepal. “It seems the U.S. government asked for a report on the project, and the project submitted it. Based on that, some payments were made,” he said. “Just like we received an email previously stating the project was suspended, we have not received any formal notice this time. During meetings, officials from the U.S. Embassy have only mentioned informally that the project will continue.”
He further noted that the project has a provision where certain payments can be made directly into its dollar account from the U.S., and some payments have been made through that channel in the meantime.
Earlier, in the month of Chaitra, MCA Nepal had stated that the U.S. government had granted permission to proceed with certain activities under the MCC project. “The U.S. government has allowed some activities under the MCC Nepal Compact to move forward. However, this permission does not indicate any final outcome of the ongoing review,” read the statement issued by MCA Nepal at the time.
Following an order by U.S. President Donald Trump, the MCC had taken a step that placed Nepal’s project in uncertainty. On Falgun 2, the MCC had sent a letter to the Government of Nepal notifying it of a suspension of disbursements. However, by Chaitra, MCA Nepal had announced that the previously halted project would resume. Now, MCA Nepal has welcomed what it claims to be the U.S. government’s decision to continue the project.
MCA Nepal is a program under the MCC. As per the agreement signed between the Government of Nepal and the MCC on Bhadra 29, 2074 (September 14, 2017), project implementation officially began on Bhadra 13, 2080 (August 30, 2023). The original agreement involved a total project cost of USD 697 million (around NPR 92 billion), with USD 500 million from the U.S. government and USD 197 million from the Government of Nepal.
In Poush (December–January), the U.S. government announced an additional USD 50 million in support for the project. Under MCA Nepal, construction is ongoing for an 18-kilometer Butwal–Gorakhpur cross-border transmission line, a 400 kV New Butwal substation, a 400 kV New Damauli substation, and a 400 kV Ratamate substation. MCA Nepal stated that procurement proposals are currently being evaluated for a 297 km transmission line and a 40 km road section from Dhankhola to Lamahi.
MCA Nepal signed an agreement on Bhadra 14, 2081 (August 31, 2024) with Transrail Lighting Limited for the construction of the 18 km Nepal portion of the Butwal–Gorakhpur transmission line at a contract value of USD 12.36 million. Initial work is underway with a target to complete construction within 21 months. So far, NPR 167.9 million has been paid to Transrail Lighting.
In Tanahun, detailed survey, geotechnical investigation, and initial site preparation are underway for the 400 kV New Damauli substation. For this substation, an agreement was signed on Shrawan 16, 2081 (August 1, 2024) with India’s Techno Electric & Engineering Company. NPR 522.1 million has been paid to the contractor.
In Nuwakot, a contract for the 400 kV Ratamate substation was signed with the same Indian company on Asar 1, 2081 (June 14, 2024) at a value of USD 51.6 million, with a construction timeline of 39 months. The substation is currently in the final design and preparation phase, and NPR 690 million has been paid to the company.
For the 400 kV New Butwal substation in Nawalparasi (Bardaghat Susta West), an agreement was signed with Linxon India on Baisakh 27, 2081 (May 9, 2024). The project, valued at USD 35.51 million, is also set to be completed in 39 months. MCA Nepal reported that NPR 472.7 million has already been paid to the contractor.
MCA Nepal had re-invited bids for the 297 km transmission line on Mangsir 12, 2080 (November 28, 2023), with a submission deadline of Falgun 7, 2081 (February 19, 2025). Nine companies submitted bids for the construction of three transmission lines, and evaluation of the proposals is currently ongoing.
The estimated cost of constructing the 297 km transmission line is USD 26.42 million. A tender has also been called for the maintenance of a 40 km road section from Dhankhola to Lamahi using Full Depth Reclamation (FDR) technology. Eleven bids have been received, and the final selection process is underway.
