Seen from a vantage point high above the Seti River near Damauli, excavators and tipper trucks look like tiny insects clawing away at a cliff. Occasionally there is the sound of dynamite blasting at the rock face. This is the Tanahu Hydropower Project, and it is an indication of how stagnant Nepal’s energy planning has been that this is only the second reservoir scheme after <a href="https://nepalitimes.com/banner/climate-smarter-himalayan-infrastructure">the Kulekhani Dam</a> was commissioned in 1982. &nbsp;&nbsp; The workers have nearly completed drilling a tunnel to divert the Seti’s turbid sediment-laden water so construction of the 140m high concrete dam can begin. When completed, the reservoir will be 7.25 sq km in area and store nearly 300 million m³ of monsoon runoff. And unlike Kulekhani, the Seti is a snow-fed river originating in the glacier below Annapurna 4.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20231228101236_c757ef30ebe38c1fb97b2e57cac11eb6c237191f067b5e6d467933afeb49023b.jpg" data-media-id="editor_1" data-image-id="20231228101236_c757ef30ebe38c1fb97b2e57cac11eb6c237191f067b5e6d467933afeb49023b" data-rendition-name="original" width="624" height="400" loading="lazy" alt="Tanahu Hydropower"> </figure>   <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20231228101252_1f49967359964e87c73640576b17c765f6fe153a0fbd1c11f07cefe8012b60d1.jpg" data-media-id="editor_2" data-image-id="20231228101252_1f49967359964e87c73640576b17c765f6fe153a0fbd1c11f07cefe8012b60d1" data-rendition-name="original" width="1443" height="1111" loading="lazy" alt="Tanahu reservoir"> <figcaption>The 3D modelling of the Dam in Tanahu. Photo: TANAHU HYDROPOWER LIMITED</figcaption> </figure>  A 420m head on the Seti will take water through 7.25m wide tunnels and penstock pipes to an underground powerhouse to give the scheme an installed capacity of 140MW and an annual energy generation of 587.7GWh. While this capacity is less than other projects like Tama Kosi, the stored water can be drained at peak hours and during the dry season to augment electricity supply and keep the water flowing downstream. Also called Upper Seti, this project funded by the Japan International Cooperation Agency (JICA), Asian Development Bank (ADB), European Investment Bank (EIB) and Nepal Electricity Authority (NEA) is designed for at least six hours of peak operation during the driest months of the year. “Most of Nepal’s hydropower projects are run-of-the-river projects which means we can’t store water for winter months when domestic demand is highest,” says engineer Raja Bhai Shilpakar, Tanahu's project manager. “We must shift our focus to reservoir projects now to ensure Nepal’s energy security and to reduce power import.” Indeed, while Nepal has an installed capacity of around 2,800MW in the monsoon, and sold electricity worth Rs15 billion to India this summer, NEA is still importing power from Indian thermal plants to meet 30% of the winter demand.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20231228101228_9c08ea43a75978bd194b02fbaf030ce5413d33609ff601e70d8912b60bde69e3.jpg" data-media-id="editor_3" data-image-id="20231228101228_9c08ea43a75978bd194b02fbaf030ce5413d33609ff601e70d8912b60bde69e3" data-rendition-name="original" width="1500" height="1125" loading="lazy" alt="Tanahu Hydropower"> <figcaption>GREEN ENERGY: Dam site of the under-construction Tanahu Hydropower Project with a 25km long reservoir which will be completed in May 2026. The concrete dam will be 140m in height and hold 295 million m³ of monsoon runoff. Photo: TANAHU HYDROPOWER LIMITED</figcaption> </figure>  Winter generation is low because the rivers are running low and this situation has been made worse by prolonged post-monsoon droughts. Last year, NEA said power supply fell by 20% of the winter average because there was no precipitation and melting of snow.&nbsp; In its new proposed draft, the National Planning Commission (NPC) has set a power generation target of 11,769MW in the next five years. The private sector, which generates nearly 80% of current electricity supply, is not so optimistic given the bureaucratic and financing hurdles. &nbsp; But even then, there will still be a supply shortfall unless more reservoir projects are built to even out the annual generation profile. Besides Tanahu, reservoir projects are planned on the Budi Gandaki, Tamor and Upper Arun, but those will not be ready for another ten years. Dams are also much more costly to build, and will need government involvement.&nbsp; Apart from local demands for compensation for submerged land, there are also concerns about the greater ecological impact of reservoir projects. Studies have shown that rampant dam construction leads to a decline in aquatic life, and livelihoods of people downstream.&nbsp; The other challenge is increasing risk of climate change-induced disasters like cloudbursts and Glacial Lake Outburst Floods that can wipe out expensive dams like the Chungthang Dam disaster in Sikkim in October.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20231228101244_bf6f78d0758247f46bc156e116aacde6e20b6a02a7fa82057181914e4955f09a.jpg" data-media-id="editor_4" data-image-id="20231228101244_bf6f78d0758247f46bc156e116aacde6e20b6a02a7fa82057181914e4955f09a" data-rendition-name="original" width="1700" height="900" loading="lazy" alt="Hydropoer and dams in Nepal"> <figcaption>This underground powerhouse (centre) will give installed capacity of 140MW and an annual energy generation of 587.7GWh. Photos: SONIA AWALE</figcaption> </figure>  Nepal’s own Kulekhani was supposed to have a lifespan of 100 years but a cloudburst in the catchment area in 1993 deposited so much debris into the lake that the cascade power plants that generate 106MW of electricity from it will now function only for another 30 years.&nbsp; Shilpakar who was also involved in the Kulekhani project says lessons have been learnt, and Tanahu will have a flushing gate to drain sediment from the reservoir. It is considered too far downstream to be at risk from glacial lake bursts. &nbsp;The dam is also built to withstand earthquakes of much higher intensity than the 2015 event.&nbsp; “Tanahu is a concrete gravity dam with a much larger catchment than Kulekhani,” he explains. “But rainfall patterns have changed drastically. So we have added two flushing gates, increasing the dam’s lifespan to 120 years.” Despite the downside, most experts agree that reservoirs are crucial for flood control and dry season irrigation downstream, especially as water supply becomes scarcer with the climate crisis. Reservoirs also have other benefits like fisheries, inland navigation and tourism, as seen in Kulekhani. “In many ways, reservoirs are not just clean energy projects but also climate adaptive initiatives,” says Pushkar Manandhar of the ADB. “Storage hydropower serves as a buffer to cope with erratic rainfall and act as a shock absorber. They store water to augment lean season flow of rivers.” But water is a <a href="https://nepalitimes.com/here-now/the-geopolitics-of-nepal-s-water-and-electricity">geopolitical hot potato in the region</a> with India’s increased involvement in building river schemes in Nepal, including Pancheswar Dam on the border Mahakali River, Arun III, West Seti reservoir, and other projects. Experts say India’s real interest is in water supply, and would not mind if it gets regulated water for free from reservoirs like Tanahu in Nepal.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20231228101240_f5a3473abe0186d1fb7842724607238abd3c8671c91c8e8a4bfebfbc63591aa4.jpg" data-media-id="editor_6" data-image-id="20231228101240_f5a3473abe0186d1fb7842724607238abd3c8671c91c8e8a4bfebfbc63591aa4" data-rendition-name="original" width="1500" height="1125" loading="lazy" alt="Hydropoer and dams in Nepal NT 1"> <figcaption>Tanahu hydropower dam site.</figcaption> </figure>  But India is playing hardball by refusing to buy electricity from projects it deems to have Chinese investment or involvement. In Tanahu, meanwhile, engineers are running out of explosives because of a ban on export of dynamite by India.&nbsp; Says Shilpakar: “No contractor is getting an explosive permit from India and we cannot get any from the Chinese either, we need the government-to-government deals otherwise the project could be delayed.” Tanahu also includes the construction of a 220kV double circuit Damauli-Bharatpur transmission line and is looking at a completion date of May 2026. There are also plans for a 126MW Lower Seti cascade project with a dam at Saranghat, and a powerhouse at Mugling to generate 520GWh. Experts say that along with new reservoir projects, Nepal now needs to <a href="https://nepalitimes.com/news/balance-of-power">pay attention to transmission and distribution</a> to streamline supply so that domestic consumption increases. &nbsp; “We didn’t develop all aspects of hydro schemes in parallel,” says ADB’s Manandhar. “We focused mostly on generation and now there is a real bottleneck in transmission and distribution.” Kathmandu is a load centre, but transmission lines do not have the capacity to bring the electricity from power plants in central and eastern Nepal.&nbsp; “We have to build substations to future-proof supply, but there are issues with right of way and land acquisition,” Manandhar adds.&nbsp; Which is why NEA is working at speed to upgrade its substation in Siuchatar, with a state-of-the-art Distribution System Control and Data Centre so that power supply to localities in the Valley can be monitored and controlled more efficiently.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20231228101248_dae5f9c304943d4efb156a9930b0ca1894b2f6b915abeb6c30d510e0f246e4a5.jpg" data-media-id="editor_8" data-image-id="20231228101248_dae5f9c304943d4efb156a9930b0ca1894b2f6b915abeb6c30d510e0f246e4a5" data-rendition-name="original" width="1500" height="1125" loading="lazy" alt="Distribution substations"> <figcaption>Distribution System Control and Data Centre in Siuchatar.</figcaption> </figure>   <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20231228101252_fb9c41952a2c918b2a8eccbd5483bcd28378e43eb533d3edfcd2c2b82a495255.jpg" data-media-id="editor_9" data-image-id="20231228101252_fb9c41952a2c918b2a8eccbd5483bcd28378e43eb533d3edfcd2c2b82a495255" data-rendition-name="original" width="1500" height="1125" loading="lazy" alt="Transmission lines"> </figure>  “If there is a fault in distribution, we will be able to see it from here, we won’t need locals to call us anymore,” says electrical engineer Dhirendra Bajgain. “At the same time, we will be able to quickly restore the fault, in minutes instead of hours by just isolating that area.” But elsewhere, like in the Dana substation near Kushma of Parbat district, authorities are dealing with a different kind of <a href="https://nepalitimes.com/here-now/nepal-s-precious-electricity-going-waste">power spill</a>. Pritam Raj Bista of the Parbat Distribution Centre says that while there is 100% electrification, the total number of consumers is decreasing due to depopulation.&nbsp; In contrast, nearly 170km south in Dhakdahi near Butwal, demand is peaking with local industries complaining about not getting dedicated feeder lines on time. Even when Nepal did away with power rationing, the area was still facing power cuts until Dhakdahi substation was set up a few years ago. The new substation shared the power load with the Butwal substation and the area has been getting improved voltage and power quality.&nbsp; At the recently inaugurated Kushma-New Butwal 220kV substation to evacuate power from the Kali Gandaki Transmission Corridor, the NEA’s Kulman Ghising said his main priority now was to invest in transmission and distribution infrastructure. “Butwal is critical because it is at the intersection of the Kali Gandaki corridor in central Nepal and the East-West transmission artery,” Ghising said. “It is a pooling hub for power transmission and distribution westwards and for export to India.”  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20231228101248_635bc1ff0aec0f15a1874a56b81d61113abcd8f5d2ded97271c5c90f20ecd643.jpg" data-media-id="editor_11" data-image-id="20231228101248_635bc1ff0aec0f15a1874a56b81d61113abcd8f5d2ded97271c5c90f20ecd643" data-rendition-name="original" width="1220" height="1500" loading="lazy" alt="Transmission lines"> <figcaption>Transmission lines at the recently inaugurated Kushma-New Butwal 220kV substation which will evaculate power from the Kali Gandaki Transmission Corridor. </figcaption> </figure>  Indeed, these transmission lines will dovetail with t<a href="https://nepalitimes.com/editorial/challenge-of-the-millennium">he Millennium Challenge Compact</a> (MCC)-supported lines from Hetauda via Damauli. The challenge now, Ghising says, is local compensation demands to transmission lines which have delayed them.&nbsp; “Our field staff spend 90% of their time dealing with local opposition, social and environmental regulations,” he added. Transmission lines under the MCC project are likely to face even stronger opposition because of <a href="https://nepalitimes.com/editorial/the-message-is-the-medium-z5w3ekk2">political opposition to the US-funded initiative</a>, and local belief that the project has lots of money.&nbsp; If Nepal is to save its economy and meet net-zero targets by 2045, increasing domestic demand should be the priority, and for this, reservoir projects, transmission lines and distribution infrastructure are key.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20231228101248_985e74ee96fef5c92a828612ff7c97a05ba34a61c490a5e578f3c592af986584.jpg" data-media-id="editor_14" data-image-id="20231228101248_985e74ee96fef5c92a828612ff7c97a05ba34a61c490a5e578f3c592af986584" data-rendition-name="original" width="1500" height="1125" loading="lazy" alt="Transmission lines"> </figure>  Nepal could export more electricity but India is buying less than 700MW from Nepal because of <a href="https://nepalitimes.com/here-now/geopolitics-of-nepal-s-rivers">Chinese involvement in projects</a>. It is therefore in Nepal’s own strategic interest to increase domestic demand as much as possible.&nbsp; Even if Nepal could sell all its present electricity generation, it would amount to a mere Rs20 billion against an annual trade deficit with India at a staggering Rs840 billion. &nbsp; Instead, if <a href="https://nepalitimes.com/here-now/fueling-nepal-s-economic-crisis">we reduce just 10% of our petroleum bill</a> by electrifying industries, household use and transport, Nepal can save at least Rs30 billion a year. Improving public health and ecology will be a bonus.&nbsp; “If we sell electricity, we just get cash benefits but if we were to make the maximum use of our power within the country, there will be cascade impacts,” says engineer Raja Bhai Shilpakar. “We can revolutionise our industries and manufacturing, create jobs and prevent young talented people from migrating.” &nbsp;

Sonia Awale

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Missing pieces of the hydropower jigsaw

<figure><img width="2211" height="1541" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221114101116/6372080d9c7e80680e0b54c7jpeg.jpg" alt=""/><figcaption></figcaption></figure>A much-delayed half-billion dollar US government project to upgrade Nepal’s infrastructure <a href="https://www.nepalitimes.com/latest/mcc-row-rocks-nepals-ruling-coalition/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/mcc-row-rocks-nepals-ruling-coalition/&amp;source=gmail&amp;ust=1643783587117000&amp;usg=AOvVaw1mPNK10b4Qti4kBCQ2ZqtY">threatens to split Nepal’s governing coalition</a>, amidst indications the <a href="https://www.nepalitimes.com/here-now/china-lobbying-against-mcc/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/here-now/china-lobbying-against-mcc/&amp;source=gmail&amp;ust=1643783587117000&amp;usg=AOvVaw3xLZatwKG1qUAKCvOP5DVb">Chinese have intensified lobbying</a> with politicians to oppose it.Prime Minister Sher Bahadur Deuba of the Nepali Congress (NC), a minor coalition partner Janata Samajbadi Party (JSP), as well as the main opposition UML support the project. But it is vehemently opposed by two Communist parties: the Maoist Centre (MC) and the Unified Socialists.The strain within the coalition appears to have taken a turn for the worse after Prime Minister Deuba got wind that <a href="https://www.nepalitimes.com/latest/nepal-speakers-ipu-trip-slammed/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/nepal-speakers-ipu-trip-slammed/&amp;source=gmail&amp;ust=1643783587117000&amp;usg=AOvVaw1748mrZsIq3zaEcjwoZOZ_">Parliament Speaker Agni Sapkota</a> of the MC postponed a sitting of the House on Sunday that was to discuss the Millennium Challenge Corporation (MCC) project.After a meeting of the five coalition partners on Saturday failed to agree on getting the MCC ratified by Parliament, Sapkota called off a scheduled House sitting for ten days without informing the prime minister.Deuba is said to be so put off that he has leaked a threat to register a proposal to unseat Speaker Sapkota, and has hinted that he will push through the MCC even if it means a split in the coalition.China’s Ambassador to Nepal Hou Yanqi has been meeting various coalition leaders in the past months to lobby against the MCC, the latest was a one-on-one with the opposition UML’s K P Oli at his residence on 22 December.Then on Saturday, just after the inconclusive coalition meeting, the Maoist Centre’s Pushpa Kamal Dahal held an hour-long hush-hush virtual meeting on Saturday with Song Tao, the high-ranking head of the International Department of the Communist Party of China (CPC).Although the conversation was said to have centred around greeting each other on Chinese New Year and Dahal being congratulated for being re-elected chair of the Maoist Centre, the timing of the online discussion on Saturday evening is seen as significant.In November also, CPC officials had talked to senior party leaders in Kathmandu to actively dissuade them from passing the American project. The deputy head of the International Department of the CPC Chen Zhao had even called the UML General Secretary Ishwar Pokhrel on 13 December to try to change his party leadership’s pro-MCC stance. Zhao also spoke to Madhav Kumar Nepal of the Unified Socialists, and the latter is said to have assured him that he would not let the MCC be ratified.Speaker Agni Sapkota has been known to be close to Beijing, and has made no secret for his opposition to the MCC, and this week was not the first time that he blocked ratification in Parliament. His predecessor Krishna Bahadur Mahara, also a close confidante to Dahal, was also publicly anti-MCC before he was removed from office in 2019 after allegations of rape.   <a href="https://www.nepalitimes.com/latest/is-china-now-micro-managing-nepal-politics/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/is-china-now-micro-managing-nepal-politics/&amp;source=gmail&amp;ust=1643783587118000&amp;usg=AOvVaw1ZjFWwIUS-IjUQIDA_jTNV">China’s suspicions about the MCC</a> as being an American geo-strategic counter to its own Belt Road Initiative (BRI) can also be gleaned from Chinese academics who have been <a href="https://mp.weixin.qq.com/s/TgjzJv5skEkt6rjm9pyU8w" target="_blank" rel="noopener noreferrer">writing in state controlled media</a> as well as in interviews with Nepali portals. Wang Yiwei of Renmin University in an op-ed in October called the MCC ‘American ploy’.Besides geopolitics, the MCC has also become a factor as <a href="https://www.nepalitimes.com/banner/dance-of-democracy/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/banner/dance-of-democracy/&amp;source=gmail&amp;ust=1643783587118000&amp;usg=AOvVaw2v7G-9XPUQE_b0yVvy5RP7">Nepal’s domestic politics</a> as parties try to position themselves for upcoming local government elections in May and federal polls later this year.Last week, Deuba managed to convince Dahal and Nepal to <a href="https://www.nepalitimes.com/latest/nepal-coalition-dilly-dallying-on-polls/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/nepal-coalition-dilly-dallying-on-polls/&amp;source=gmail&amp;ust=1643783587118000&amp;usg=AOvVaw3bRn0dwVnuNcGvc5nNm05E">lift their opposition to holding local elections</a> on time in exchange for keeping the coalition in an electoral alliance. Although NC insiders say they also got a commitment from them to back the MCC, the two leaders have denied this.Both say they will back the MCC only “with amendments” to clauses in the contract that they say undermines Nepal’s sovereignty.For its part, the UML has obstructed Parliament for the past six months, accusing Speaker Sapkota of allowing a breakaway group from the Nepal faction to keep their seats.Amidst all this, Deuba appears to be losing his patience with coalition partners. He takes personal responsibility for having signed the MCC agreement during his previous tenure five years ago, and fears loss of credibility for Nepal from international partners if the agreement is not ratified.Sources said that in Saturday’s meeting, Deuba actually brought up the possibility of the coalition splitting if the MCC is not passed. Deuba is gambling that an electoral alliance with the coalition is important for the MC and the Unified Socialists, both of which have been <a href="https://www.nepalitimes.com/latest/who-wants-early-elections-and-why/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/who-wants-early-elections-and-why/&amp;source=gmail&amp;ust=1643783587118000&amp;usg=AOvVaw3EuLUjhgdgtlUAmjsBpP1O">weakened by their split with the UML.</a>The UML itself is now playing coy, and K P Oli has made no secret of its aim to use the MCC to split the coalition. Deuba is determined to push the MCC to Parliament even if it means getting UML support, since the NC and JSP alone do not have the numbers to ratify it.UML Chair K P Oli was a strong backer of the MCC when he was prime minister till July last year, and it was in fact his erstwhile party colleagues Pushpa Kamal Dahal and Madhav Kumar Nepal who <a href="https://www.nepalitimes.com/latest/mcc-damned-if-we-do-damned-if-we-dont/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/mcc-damned-if-we-do-damned-if-we-dont/&amp;source=gmail&amp;ust=1643783587118000&amp;usg=AOvVaw2o4JhiHrU0WJYe66eGhiHV">weaponised the MCC</a> to bring him down. Ultimately, this led to their Nepal Communist Party to split into the MC and the UML, and the UML itself later split with Nepal breaking off to form the Unified Socialists.Having been so vehemently opposed to MCC, Dahal and Nepal can now not do a 180 degree on the project. And they also have to contend with the Chinese breathing down their necks.One of the more vocal proponents of the MCC has been former Maoist ideologue and ex-prime minister Baburam Bhattarai who fell out with Dahal and is now with the JSP.Bhattarai, who also has a PhD in urban planning, tweeted on Monday: ‘The MCC is a trial by fire for Nepal’s political parties, mainly the Communists. First: Will we try to balance the US and India and China or be beholden to one of them? Second: If we do not want American support, what will we do with aid from the WB, IMF or ADB? If an American grant is untouchable, how about aid from India, China or others?’ <img width="640" height="175" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221114101116/637208109c7e80680e0b54c8jpeg.jpg" alt="">The $500 million project was signed in 2017 when Prime Minister Deuba led a coalition that also had the Maoists as a partner in government. The Americans have denied that the project has any military component, saying Nepal qualified for it and there are no strings attached.Increasingly impatient with delays in Nepal and irritated with what it sees as Chinese obstruction, the Americans have sent a <a href="https://www.nepalitimes.com/latest/mcc-row-rocks-nepals-ruling-coalition/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/mcc-row-rocks-nepals-ruling-coalition/&amp;source=gmail&amp;ust=1643783587118000&amp;usg=AOvVaw2Io7kTRWitTQBFQcPJndxQ">slew of high officials to Nepal</a> in the past six months, who has also warned Nepal that project approval is time-bound, and the MCC can withdraw the grant if Nepal does not want it.The project will pay to expand <a href="https://www.nepalitimes.com/latest/the-cost-of-no-mcc/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/the-cost-of-no-mcc/&amp;source=gmail&amp;ust=1643783587118000&amp;usg=AOvVaw3ftWPiTFZ8uZospptUy9b3">Nepal’s electricity grid</a> with a 400kVA transmission line to distribute power from eastern to western Nepal, as well as export surplus to India. Nepal’s <a href="https://www.nepalitimes.com/banner/nepals-precious-electricity-going-waste/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/banner/nepals-precious-electricity-going-waste/&amp;source=gmail&amp;ust=1643783587118000&amp;usg=AOvVaw2H55BAU4KQwQs8tcmB84xz">power producers could lose</a> up to Rs142 billion annually if the electricity lines are not built to evacuate the estimated 5,000MW of generation capacity by 2025. The project also has a component to <a href="https://www.nepalitimes.com/latest/generating-electricity-and-cash-for-nepalis/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/generating-electricity-and-cash-for-nepalis/&amp;source=gmail&amp;ust=1643783587118000&amp;usg=AOvVaw212arRNKdVKZSYW2VBkCRW">boost economic growth</a> through improvements in highway connectivity in Central Nepal.

MCC risks split in Nepal’s ruling coalition

<figure><img width="1198" height="1227" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/2022111016114/636d13819c7e80680e0a9926jpeg.jpg" alt=""/><figcaption>Photo: BIKRAM RAI/ NEPALI TIMES ARCHIVES</figcaption></figure>Nepal could lose Rs142 billion a year in wasted surplus energy if the <a href="https://www.nepalitimes.com/editorial/just-do-it/" target="_blank" rel="noopener noreferrer">Millennium Challenge Corporation (MCC)</a> project designed to upgrade the electricity grid and highways is not endorsed by Parliament.
Nepal is currently generating 2,000MW of <a href="https://www.nepalitimes.com/editorial/manpower-and-hydropower/" target="_blank" rel="noopener noreferrer">hydroelectricity</a> with an additional 2,500MW under construction. This figure will soar to 7,300MW by 2025 as per Nepal Electricity Authority (NEA) estimates.Presently, Nepal consumes 1,500MW of electricity during the peak season, which is increasing by 20% every year. At this rate, in the next four years, the peak demand will be at 2,600MW, which means there will be an excess of 4,700MW.  
Nepal can export this surplus power to India and there are already agreements in place to facilitate trade between the two countries, but the existing Dhalkebar-Muzaffarpur cross border <a href="https://www.nepalitimes.com/latest/mcc-damned-if-we-do-damned-if-we-dont/" target="_blank" rel="noopener noreferrer">transmission line</a> can only handle 800MW each way. 
“If Nepal is unable to sell excess energy, we will be losing Rs142 billion every year. At a time when we are lagging in infrastructure, we shouldn’t stop the MCC from being approved,” says Dinesh Shrestha, chair of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).
FNCCI, Confederation of Nepalese Industries (CNI), Nepal Chamber of Commerce, Federation of Contractors’ Associations of Nepal, Independent Energy Producers’ Association and Nepal-US Chamber of Commerce and Industry have submitted a memorandum to Prime Minister Sher Bahadur Deuba urging the government to stop delaying <a href="https://www.nepalitimes.com/latest/missing-links-in-nepals-mcc-debate/" target="_blank" rel="noopener noreferrer">the five-year compact</a> and implement it soon. 
This is the private sector’s second memorandum to the government in a month. The group also states that some 7,000 Nepalis will be employed during the construction phase of the MCC, which also includes the upgrade of arterial highways to facilitate efficient transportation. The FNCCI memo comes just before the arrival in Kathmandu on Wednesday of US Assistant Secretary for South and Central Asian Affairs, Donald Lu during which he is expected to discuss the MCC ratification with Prime Minister Deuba and other party leaders.It is an indication of the importance the US attaches to the project that Deputy Assistant Secretary for South ans Central Asian Affairs Kelly Keiderling also arrives in Kathmandu on Thursday. Deuba met US President Joe Biden at the COP26 Glasgow summit two weeks ago, and revealed that he and Maoist leader Pushpa Kamal Dahal had written jointly to the US government saying the MCC would be ratified. But the project has become such a political hot potato in Nepal that Dahal quickly backtracked, clarifying that he had only said that it needed amendments before being passed. A large chunk of the US-aided $500 million grant project is set aside to build the Kathmandu-Hetauda-Butwal 400KVa transmission line which will distribute electricity from existing and new hydropower plants on the Budi Gandaki, Trisuli, Kali Gandaki, Marsyangdi, Kosi, and Tamakosi corridors, and also connect to a high-capacity line to Gorakhpur so Nepal can sell surplus monsoon electricity to India.  
In fact, in anticipation of the MCC project being completed, the NEA <a href="https://www.nepalitimes.com/latest/india-nepal-sign-power-exchange-deal/" target="_blank" rel="noopener noreferrer">signed an agreement</a> with the state-run Power Grid Corporation of India (POWERGRID) for the Butwal-Gorakhpur cross border transmission line extension two months ago in September, ahead of MCC vice president <a href="https://www.nepalitimes.com/banner/mcc-ball-in-nepals-court/" target="_blank" rel="noopener noreferrer">Fatema Z Sumar's visit to Nepal</a>.
But the MCC, the biggest grant aid Nepal has ever received has become the victim of intense power struggle and political infighting within the country. It was first weaponised to unseat K P Oli and now <a href="https://www.nepalitimes.com/latest/mcc-row-rocks-nepals-ruling-coalition/" target="_blank" rel="noopener noreferrer">threatens to split the ruling coalition</a> led by Prime Minister Sher Bahadur Deuba. 
The project is seen by the critics as part of America’s Indo-Pacific Strategy to counter China’s Belt Road Initiative. The anti-MCC rhetoric has gained such momentum that the public is convinced it supersedes Nepal’s Constitution and is anti-national, forcing even the staunch supporters from speaking in its favour.
Adds FNCCI’s Dinesh Shrestha: “The MCC is crucial for Nepal’s energy sector and <a href="https://www.nepalitimes.com/editorial/knowing-whats-good-for-nepal/" target="_blank" rel="noopener noreferrer">is to our benefit</a>. Moreover, this is a grant, not a loan. Further delaying and cancelling the compact will <a href="https://www.nepalitimes.com/latest/mcc-row-damages-nepals-credibility/" target="_blank" rel="noopener noreferrer">tarnish Nepal’s image and credibility</a> in the world community.”
MCC or no MCC, one thing is for sure. Nepal must build transmission lines and upgrade its electricity grid one way or the other so as not to waste surplus energy it is set to generate in the near future. 
Alternatively, experts say, the government must work immediately to <a href="https://www.nepalitimes.com/editorial/good-cop-bad-cop/" target="_blank" rel="noopener noreferrer">electrify transport and cooking</a> for domestic consumption of surplus power and reduce its import bill on petroleum products and LPG.

The cost of no MCC

<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221110141148/636d01db9c7e80680e0a364djpeg.jpg" alt="" width="1500" height="1000"/><figcaption></figcaption></figure>“Countries knock at our doors all the time for capital, as it is getting harder and harder to obtain development funds. We are holding $500 million for Nepal. We cannot wait forever. When will it be the right time for Nepal?”Fatema Z Sumar, Vice President of Compact Operations at the Millennium Challenge Corporation (MCC) appeared mystified about why a country like Nepal that needs all the help it can get to develop its infrastructure, should be so hesitant about the grant her government is offering.Sumar was on the final day of her <a href="https://www.nepalitimes.com/latest/mcc-row-rocks-nepals-ruling-coalition/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/mcc-row-rocks-nepals-ruling-coalition/&amp;source=gmail&amp;ust=1631579093888000&amp;usg=AFQjCNHAfb7xioCyDtl5OJ53aqyeI5-LuA">four-day visit to Nepal</a> on Sunday, speaking at an engagement with opinion makers. There was a litany of questions from across the table, and Sumar sounded like someone who is getting somewhat jaded answering the same questions over and over again in Kathmandu.“No, the MCC is not part of the <a href="https://www.nepalitimes.com/editorial/between-two-oceans/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/editorial/between-two-oceans/&amp;source=gmail&amp;ust=1631579093888000&amp;usg=AFQjCNFfIGiI1YhN4TBrqt-_uVwcnhLEPg">Indo-Pacific Strategy</a> and there is no US Army involvement.”“This is a treaty between two countries and has gone through the Obama, the Trump and now the Biden administrations.”“In order to make this a treaty, the Nepal government wanted to ratify it through Parliament. So, we are waiting for that.”Sumar was a former assistant secretary for South and Central Asia at the US State Department before joining the MCC. Her family is Malaysian Indian, so she understands the region well, but she was hearing in Nepal some of the same political rhetoric that led to the Sri Lankans cancelling the MCC last year for being ‘against the national interest’.MCC makes three types of grants: compacts, threshold programs and concurrent compacts for regional investment. Nepal’s grant is a five-year compact agreement with the MCC that allows an eligible country to fund specific programs targeted at reducing poverty and stimulating economic growth.The concept of the MCC is to make US development assistance ‘smarter’, and to study a country’s bottlenecks so that catalytic investment can allow it to take an economic leap. A panel of Nepali and American experts concluded in 2017 that increasing hydropower transmission capacity and upgrading highways would be most cost-effective, at a time when the country was suffering 12-hour daily power cuts.When a country applies for a grant from the MCC, the board examines its performance based on 20 policy indicators, and selects based on policy performance. The MCC says its grants are given to country-driven and country-led investments and infrastructure priorities for achieving sustainable economic growth and poverty reduction, and Nepal qualified.<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221110141148/636d01df9c7e80680e0a364ejpeg.jpg" alt="" width="1500" height="998"><figcaption>MCC vice president Fatema Sumar (third from left) with Prime Minister Deuba on Saturday at Baluwatar. Photo: PMO</figcaption></figure>So far MCC has approved $13.7 billion in compacts and $631 million in threshold programs worldwide. After Sri Lanka pulled out, Nepal is the only South Asian country on the list of <a href="https://www.nepalitimes.com/editorial/a-millennium-challenge/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/editorial/a-millennium-challenge/&amp;source=gmail&amp;ust=1631579093888000&amp;usg=AFQjCNHcCgQFuOb2-re-ZURkglqZhwDvTg">MCC-approved compacts</a>.“The $500 million we are holding for Nepal is money not given to other countries which need to get out of poverty,” said Sumar’s colleague Jonathan A Brooks at the interaction. Although Brown said he had no idea where the confusion about the MCC having a military component comes from, a <a href="https://www.nepalitimes.com/editorial/knowing-whats-good-for-nepal/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/editorial/knowing-whats-good-for-nepal/&amp;source=gmail&amp;ust=1631579093888000&amp;usg=AFQjCNHV-jTWUQwTz4eLLTh_R5gdfjVGwQ">comment by US Under Secretary of State David J Ranz</a> in 2019 that the MCC was indeed a part of the US <a href="https://www.nepalitimes.com/editorial/between-two-oceans/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/editorial/between-two-oceans/&amp;source=gmail&amp;ust=1631579093888000&amp;usg=AFQjCNFfIGiI1YhN4TBrqt-_uVwcnhLEPg">Indo-Pacific Strategy</a> did a lot of self-inflicted damage.Sumar and Brooks fielded <a href="https://www.nepalitimes.com/latest/post-truth-politics-in-nepal/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/post-truth-politics-in-nepal/&amp;source=gmail&amp;ust=1631579093888000&amp;usg=AFQjCNEL3a5V092kNi8iXts-zWiYBTZWOA">other questions</a> that had become familiar to them during their stay in Kathmandu with answers like: the agreement with Nepal prohibits army involvement, security issues are totally for Nepal government to oversee, the compact has no provisions that contradict Nepal’s laws, the project is not above Nepal’s Constitution, and international law would apply to resolve any disputes.A major chunk of the $500 million MCC grant will go to build the Kathmandu-Hetauda-Butwal 400KV transmission line to distribute 3,000MW which will come on stream in the next three years from new <a href="https://www.nepalitimes.com/opinion/decentralising-hydropower/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/opinion/decentralising-hydropower/&amp;source=gmail&amp;ust=1631579093888000&amp;usg=AFQjCNGKA68VJytSmPpVqeXiamgpi0kCgQ">hydropower plants</a>. The line will also connect to a high-capacity electricity corridor to Gorakhpur so Nepal can <a href="https://www.nepalitimes.com/latest/mcc-row-damages-nepals-credibility/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/mcc-row-damages-nepals-credibility/&amp;source=gmail&amp;ust=1631579093888000&amp;usg=AFQjCNEoVnLVfqbE4et0DScH8cbve0ffag">sell surplus monsoon electricity</a> to India in future.This week, the Nepal Electricity Authority (NEA) signed an agreement with the state-run Power Grid Corporation of India (POWERGRID) for the Butwal-Gorakhpur cross border transmission line extension in anticipation of the MCC project being completed.Sumar has seen several changes in government after she started coming to Nepal for the MCC. Prime Minister Sher Bahadur Deuba and his predecessor K P Oli were both in favour of the MCC, but other Communist partners in the ruling coalition are against it.As a descendant of an immigrant family herself, Sumar says she understands that poverty is not insurmountable, and can be prevented with the right government investment at the right time. She calls herself a “development diplomat”, and feels that economic growth built on better infrastructure would also bring Nepal stability.“The MCC will create many thousands of jobs for Nepalis at a time when the pandemic is creating losses of jobs and livelihoods,” she says, adding that when President John F Kennedy launched a major global drive to help developing countries in the early 1960s, Nepal was one of the first countries to receive the support.The criteria Nepal fulfilled to receive the MCC grant was its democratic polity, guarantees of basic freedoms, and protection of human rights. Sumar underlined the fact that the MCC would also help Nepal put renewable energy infrastructure in place that could be an example for a world coming to terms with climate change.The MCC project has become a victim of <a href="https://www.nepalitimes.com/editorial/knowing-whats-good-for-nepal/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/editorial/knowing-whats-good-for-nepal/&amp;source=gmail&amp;ust=1631579093888000&amp;usg=AFQjCNHV-jTWUQwTz4eLLTh_R5gdfjVGwQ">extreme political polarisation</a> as opponents to K P Oli used the MCC to unseat him, and now it threatens to split the ruling coalition. The anti-MCC rhetoric had been so effective in convincing the cadre and public that it is anti-national, that even supporters in Deuba’s Nepali Congress, Oli’s UML and other public figures and intellectuals are afraid to speak in favour.Social media is full of posts that say Nepal will become ‘another Afghanistan’ if Parliament ratifies the MCC. But now that Sumar and her MCC team has left, the ball is back in the court of the political class in Kathmandu to ensure that <a href="https://www.nepalitimes.com/here-now/power-politics-delays-mcc-in-nepal/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/here-now/power-politics-delays-mcc-in-nepal/&amp;source=gmail&amp;ust=1631579093888000&amp;usg=AFQjCNHlQppZeGXNXQbC5_D2GZNFz2URgw">Nepal has the capacity</a> to distribute the electricity it generates in future.

MCC ball in Nepal’s court

<figure><img width="1286" height="1500" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221110141148/636d015a9c7e80680e0a3624jpeg.jpg" alt=""/><figcaption>Vice president of US Mellennium Challenge Corporation (MCC) Fatema Z Sumar arrives in Kathmandu on Thursday.</figcaption></figure>Fatema Z Sumar, vice president of the US Millennium Challenge Corporation (MCC), parachuted into Kathmandu on Thursday amidst a <a href="https://www.nepalitimes.com/latest/mcc-damned-if-we-do-damned-if-we-dont/" target="_blank" rel="noopener noreferrer">firestorm of protest</a> against the project that threatens to divide Nepal’s coalition government.Together with her deputy Jonathan Brooks, Sumar over the next four days will be meeting Nepal’s top politicians who are for and against the <a href="https://www.nepalitimes.com/editorial/a-millennium-challenge/" target="_blank" rel="noopener noreferrer">$500 million grant project</a> designed to upgrade Nepal’s electricity grid and highways. The visit follows Sumar’s written response to concerns raised by Nepal’s Finance Ministry on 3 September regarding the grant. The main objective of the MCC is a 315km transmission line between Hetauda-Damauli-Butwal, important for the distribution of the 3,000MW of electricity that will be added to Nepal’s national grid in the next three years. <a href="https://www.nepalitimes.com/from-the-nepali-press/why-there-is-no-foreign-investment-in-nepal/" target="_blank" rel="noopener noreferrer">Why there is no foreign investment in Nepal</a> , Nepali Times <img width="512" height="461" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221110141148/636d015d9c7e80680e0a3625jpeg.jpg" alt="">The discourse surrounding the MCC has been influenced by geopolitical rivalries between India and China on the one hand and between the US and China on the other, with Nepal’s political parties <a href="https://www.nepalitimes.com/editorial/knowing-whats-good-for-nepal/" target="_blank" rel="noopener noreferrer">weaponising the project</a> to undermine each other.Indeed, support for the MCC by K P Oli was one of the issues raised by the five-party alliance that led to his ouster in July, after which <a href="https://www.nepalitimes.com/latest/deuba-5/" target="_blank" rel="noopener noreferrer">Deuba took over as prime minister</a>.Two months later, <a href="https://www.nepalitimes.com/latest/what-is-delaying-nepal-cabinet-expansion/" target="_blank" rel="noopener noreferrer">Deuba is yet to complete government formation</a>,  and support and opposition to the MCC is now threatening to undermine his governing alliance. The MCC is such a political hot potato that it was not even listed in the coalition’s common minimum program last month despite Prime Minister Deuba being for it.However, critics including his main coalition partner Pushpa Kamal Dahal of the Maoists and Madhav Kumar Nepal of the Communist Party of Nepal (United Socialist) view the project as part of America’s Indo-Pacific Strategy, and superseding Nepal’s Constitution.Sumar’s letter attempted to assuage both of these concerns, saying that the MCC is neither a part of America’s Indo-Pacific Strategy, nor is it not above Nepal’s Constitution. However, the response added that the points previously agreed upon would not be subject to amendments, which did little to quell the growing protest, including street demonstrations. The delegation led by Vice President Samar met with opposition leader K P Sharma Oli on Thursday afternoon to discuss the project, and is also set to meet with Prime Minister Sher Bahadur Deuba, Finance Minister Janardan Sharma and Energy Minister Pampha Bhusal (both Maoists). <figure><img width="1800" height="1200" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221110141148/636d01609c7e80680e0a3626jpeg.jpg" alt=""><figcaption>The delegation led by Sumar met with opposition leader K P Sharma Oli on Thursday afternoon. </figcaption></figure>The MCC compact has clauses requiring that it be ratified by Nepal’s Parliament, and that the project be completed five years after the work officially commences. Nepal had committed to ratifying the MCC in Parliament by September 2019, but the <a href="https://www.nepalitimes.com/editorial/just-do-it/" target="_blank" rel="noopener noreferrer">process has been deadlocked</a> by the feud in the ruling Communist Party of Nepal while Oli was prime minister.Lok Raj Baral, Nepal’s former ambassador to India, says that there has been unnecessary over-politicisation of the issue that has harmed Nepal’s international credibility."The opposition to the MCC seems to have been led by those in power who were also trying to stop the Arun III hydropower project," says Baral. “That the opinions of individual leaders dominate the discourse over official party decisions speaks to the selfishness of Nepal’s political leadership.”Former Prime Minister Oli backed the MCC after he took over from Deuba in 2017, but his main party rival Pushpa Kamal Dahal and dissidents from his own UML used provisions in the MCC that they saw as being anti-national <a href="https://www.nepalitimes.com/banner/own-goal/" target="_blank" rel="noopener noreferrer">against Oli</a>.  <figure><img width="1800" height="1121" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221110141148/636d01639c7e80680e0a3627jpeg.jpg" alt=""><figcaption></figcaption></figure>Now, with Deuba being Prime Minister once again, the debate surrounding the MCC is likely to put a strain on his ruling coalition, made up of Dahal’s Maoist Centre and Madhav Kumar Nepal’s breakaway CPN (United Socialist) which are opposed to the project.On the other hand, the Nepali Congress and another coalition partner Janata Samajbadi Party (JSP)  seem open to ratifying the agreement in Parliament, but they do not have enough numbers in the House for it to be successful. Deuba has been sending feelers to the opposition UML to see if it will back the ratification in Parliament. For his part, Pushpa Kamal Dahal has been saying that the MCC is a conspiracy to break the ruling alliance. However, experts see Dahal’s position on the MCC as being inconsistent and opportunistic. He went along with the project, and then <a href="https://www.nepalitimes.com/here-now/power-politics-delays-mcc-in-nepal/" target="_blank" rel="noopener noreferrer">weaponised it during his power struggle </a>with Oli."It should not come as a surprise to anyone if the ruling coalition collapses because of the MCC,” says political analyst Punaranjan Acharya, who adds that it is not Prime Minister’s Deuba’s intention to go against the agreement, but  that of the “so-called” communist parties in Deuba’s alliance. "The prime minister has tried to be transparent regarding the matter,” says Acharya. “The problem is with the double-dealing leaders of the coalition partners.”Former speaker Krishna Bahadur Mahara, who resigned from his position in 2019 following allegations of rape, said last year in a statement that he had been falsely accused for opposing the MCC. His successor Agni Prasad Sapkota has also blocked the MCC Compact for discussion on the House floor.Rastriya Janamorcha Party Chairman Chitra Bahadur KC, who is a member of Deuba’s coalition, says that the MCC will not be allowed to reach Parliament, and will not be ratified in the event it is presented before the House. “We continue to oppose the MCC, which is not even included in the coalition’s Common Minimum Program,” says KC.Constitutional expert Bipin Adhikari says it would be ironic if the MCC is not allowed to be presented before the people’s representatives in the House because of the political self-interest of the Speaker and other powerful political leaders.Other analysts insist that the political process surrounding the MCC should be moved forward in a way that the project is ratified in the House without breaking the coalition and without the party whip being applied.Read also: <a href="https://www.nepalitimes.com/latest/using-the-delay-in-mcc-to-dissect-it/">Putting the MCC in context</a>, Jeevan R Sharma and David Seddon

MCC row rocks Nepal’s ruling coalition

<figure><img width="1375" height="917" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221110141148/636d01329c7e80680e0a361ajpeg.jpg" alt=""/><figcaption>Youth staged a demonstration protesting the US-funded Millennium Challenge Corporation (MCC)  in Kathmandu on Tuesday. Photo: AMIT MACHAMASI</figcaption></figure>For many outsiders, Nepal must seem like a riddle, wrapped in a mystery, inside an enigma. Indeed, even Nepalis seem to think so. In 2017, a Nepali Congress-Maoist coalition government led by Prime Minister Deuba concluded an agreement in Washington DC for a $500 million <a href="https://www.nepalitimes.com/editorial/a-millennium-challenge/" target="_blank" rel="noopener noreferrer">US-funded Millennium Challenge Corporation (MCC)</a> compact to upgrade Nepal’s electricity grid and highways.Signing it was Finance Minister Gyanendra Bahadur Karki. Deuba is now prime minister again in a coalition once more with the Maoists, and Karki is the minister for law and parliamentary affairs. And four years later, the <a href="https://www.nepalitimes.com/editorial/just-do-it/">MCC is still stuck</a> because of a clause in the agreement requiring that it be ratified by Nepal’s Parliament.Ever since it was signed, the MCC was <a href="https://www.nepalitimes.com/editorial/knowing-whats-good-for-nepal/" target="_blank" rel="noopener noreferrer">weaponised by squabbling parties</a> and factions in Nepali politics, who in turn are heavily influenced by global and regional geopolitical rivalries between India and China on the one hand and between the US and China on the other. After K P Oli became prime minister following the 2017 elections, he strongly backed the MCC. But his rivals in the Communist Party of Nepal (CPN) including Maoist leader Pushpa Kamal Dahal, and dissidents from his own UML, used provisions in the MCC that they saw as being anti-national against Oli, and <a href="https://www.nepalitimes.com/banner/own-goal/" target="_blank" rel="noopener noreferrer">ultimately brought him down</a>.Since 13 July, Deuba has led a coalition made up of the Maoist Centre (MC), the breakaway CPN (United Socialist) and the Janata Samajbadi Party (JSP) which are all opposed to the MCC. Baburam Bhattarai was prime minister in 2012 and he is now a high-ranking JSP member.The MCC has become such a <a href="https://www.nepalitimes.com/latest/mcc-row-damages-nepals-credibility/" target="_blank" rel="noopener noreferrer">political hot potato</a> that Deuba could not even include it in the coalition’s common minimum program unveiled by the five coalition partners on 9 August.Deuba now finds himself in the peculiar position where his main ally on the MCC is perhaps Oli, the main opposition leader. But things are not so clear cut even within Oli’s UML: some members, including Bhim Rawal who refused to join Nepal’s United Socialists, is still one of the most vociferous critics of the MCC.Nepal’s <a href="https://www.nepalitimes.com/editorial/they-fail-we-fall/" target="_blank" rel="noopener noreferrer" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/editorial/they-fail-we-fall/&amp;source=gmail&amp;ust=1631155308029000&amp;usg=AFQjCNG3klwd67fP-6Xn2ZiSVVJYwWzcmQ">chronic political instability</a> has brought development to a standstill, pandemic response is erratic, but the most concrete collateral damage has been on the MCC which would have helped upgrade Nepal’s power grid with a new high-capacity 400kV transmission line between Hetauda-Damauli-Butwal, a distance of 315km.In the next three years, more than 3,000MW of electricity will be <a href="https://www.nepalitimes.com/opinion/decentralising-hydropower/" target="_blank" rel="noopener noreferrer" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/opinion/decentralising-hydropower/&amp;source=gmail&amp;ust=1631155308029000&amp;usg=AFQjCNGPfbM7-axPW-w74bmH5tAAIiE4-g">added to Nepal’s national grid</a>, more than doubling generation capacity. The new lines will allow this power to be distributed within Nepal, and also for export surplus monsoon power to India through the Butwal-Gorakhpur corridor. Despite its hydropower potential, mismanagement and poor governance means that Nepal presently spends Rs20 billion a year importing nearly half its power demand from India.If the MCC power line is not built, much of the electricity being generated in future <a href="https://www.nepalitimes.com/here-now/power-politics-delays-mcc-in-nepal/">will be wasted</a>. The Nepal Electricity Authority (NEA) has already signed power purchase agreements with private companies to buy up to 2,500MW in the next few years, and those  investments are also at risk.The anti-Oli faction in the CPN led by Pushpa Kamal Dahal and Madhav Kumar Nepal were so effective in <a href="https://www.nepalitimes.com/latest/post-truth-politics-in-nepal/" target="_blank" rel="noopener noreferrer">building up public opinion</a> against the MCC that cadres from Communist factions right down to the grassroots are now dead set against it because they believe it is part of America’s Indo-Pacific Strategy to encircle China. The MCC’s vice-president Fatema Z Sumar arrives in Kathmandu on 9 September amidst street protests. Deuba has been trying to get Oli on board the MCC and cobble together enough votes to get Parliament ratification, which would destabilise the coalition even before it can complete forming a government.Deuba tried to placate his partners last week by approving an absurdly worded letter from the Finance Ministry to the MCC, asking if the agreement undermined Nepal’s sovereignty — as if it was for the Americans to decide even if it was.The MCC agreement is hotting up even as the Deuba government walks the geopolitical tightrope between India and China. It set up another committee to investigate a border pillar issue in Humla even though a previous committee has said there has been no encroachment by China. And more than a month after the death of a Nepali on the Mahakali wire bridge, it finally sent a tepid diplomatic note to New Delhi last week.The NEA has to start working on a Plan B in place in case the MCC is not ratified so that future electricity generation can be evacuated to consumers. Read also: <a href="https://www.nepalitimes.com/latest/using-the-delay-in-mcc-to-dissect-it/">Putting the MCC in context</a>, Jeevan R Sharma and David Seddon

MCC: damned if we do, damned if we don’t

<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221110131116/636cec219c7e80680e09ad49jpeg.jpg" alt="" width="1500" height="1000"/><figcaption>Illustration: DIWAKAR CHHETRI</figcaption></figure>Nepal's prolonged political deadlock has not just affected the country’s response to Covid-19, it has also delayed the implementation of an American-aided project to upgrade Nepal’s electricity transmission grid.The <a href="https://www.nepalitimes.com/editorial/knowing-whats-good-for-nepal/" target="_blank" rel="noopener noreferrer">controversial</a> Millennium Challenge Corporation (MCC) project is the biggest single bilateral grant for a specific project in Nepal by a foreign country, but <a href="https://www.nepalitimes.com/editorial/a-millennium-challenge/" target="_blank" rel="noopener noreferrer">has become the focus of an intense power struggle </a>rival parties, and is tangled in regional and global geopolitics.A big part of the $500 million MCC grant is ear-marked for the Kathmandu-Hetauda-Butwal 400KVa transmission line which will eventually evacuate electricity generated from existing and new <a href="https://www.nepalitimes.com/opinion/decentralising-hydropower/" target="_blank" rel="noopener noreferrer">hydropower plants</a> on the Budi Gandaki, Trisuli, Kali Gandaki, Marsyangdi, Kosi, and Tamakosi corridors, and link it to Gorakhpur in India. A smaller component of the project will upgrade arterial highways. The Nepal government is putting up another $130 million as a counterpart fund.However, critics in Nepal see the MCC as America’s strategic counter to China’s Belt Road Initiative. The <a href="https://www.nepalitimes.com/editorial/knowing-whats-good-for-nepal/" target="_blank" rel="noopener noreferrer">comment by US Under Secretary of State David J Ranz</a> in 2019 that the MCC was indeed a part of the US <a href="https://www.nepalitimes.com/editorial/between-two-oceans/" target="_blank" rel="noopener noreferrer">Indo-Pacific Strategy</a>added fuel to the fire.Sandwiched between India and China, Nepal was already in a strategic tight spot, but a recent flare-up in Sino-Indian tension and US-China rivalry have caught Nepal in the crossfire. In addition, opponents of Prime Minister K P Oli have weaponised the MCC and used the project to weaken his position.But Nepal’s energy planners say that even if the MCC is delayed or cancelled, the country will have to find alternatives to build the transmission lines.“We cannot afford this uncertainty we must have a Plan B in place, otherwise we will face a huge problem. There will be all this electricity being generated in the next few years, but no way to take it to consumers,” says Hitendra Dev Shakya, who heads the Nepal Electricity Authority (NEA). “We have to build the transmission lines with or without American aid.”The reason behind the <a href="https://www.nepalitimes.com/editorial/a-millennium-challenge/" target="_blank" rel="noopener noreferrer">transmission line being prioritised</a> is to send the electricity produced from throughout Nepal, and any future monsoon surplus can then be exported to India and the same lines can be used to import power in winter if required.New projects with a generation capacity of 330MW are under construction on the Bhote Kosi in Rasuwa and Nuwakot. A further 500MW will be generated from other hydropower schemes whose construction was delayed due to the pandemic.New 220KVa transmission lines are ready to bring that electricity to Kathmandu Valley, but they only have the capacity to carry the new load from projects now under construction. But the NEA has already made Power Purchase Agreements (PPA) to buy about 6,000MW of electricity from private operators, and the distribution of that power will depend on the MCC-funded distribution system. The NEA says it urgently needs another transmission link to bring power from plants on the Tama Kosi to Kathmandu and to eastern Nepal via Hetauda.<img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221110131116/636cec259c7e80680e09ad4ajpeg.jpg" alt="" width="880" height="840"><a href="https://www.mcc.gov/where-we-work/country/nepal" target="_blank" rel="noopener noreferrer">The MCC</a> was set up in 2004 by the US Congress during the George W Bush presidency to help developing nations reduce poverty through financial aid. Since then, as Sino-US tensions grew it has taken on a strategic dimension as the two powers compete for global connectivity. The $500 million MCC grant to Nepal was sanctioned in 2017 to improve Nepal’s energy and road infrastructure.Nepal was suffering 18 hours of power cuts a day when the agreement was signed, and after much deliberation, Nepal’s planners, politicians and bureaucrats decided that <a href="https://www.nepalitimes.com/editorial/a-millennium-challenge/" target="_blank" rel="noopener noreferrer">transmission lines were the most urgently needed</a> since powerplants were already under construction. The generated electricity need to be taken to load centres, this would increase the renewable component of Nepal’s energy mix by replacing imported petroleum, and finally, to export any surplus to India.Meanwhile, the <a href="https://www.nepalitimes.com/latest/post-truth-politics-in-nepal/" target="_blank" rel="noopener noreferrer">Millennium Challenge Authority Nepal (MCA-Nepal)</a> has been set up and the office has already finalised the design of the 315km transmission line of 400KVa capacity with three new sub-stations. But the delay in Parliament’s ratification of the project means it cannot issue tender bids, and this will put 2,600MW of electricity at risk of being wasted in eh coming two years.<a href="https://archive.nepalitimes.com/news.php?id=17959" target="_blank" rel="noopener noreferrer">Khadga Bahadur Bista</a>, the CEO of MCA-Nepal estimates about it takes up to five months to select a contractor even if the project is ratified by Parliament, and after that, it will take another nine months to start construction.“We are all set to kick start this project and are ready to call for international tender bids, but due to it still pending in the Parliament we have not been able to make progress,” Bista told Nepali Times. Just Do ItThe NEA says that Nepal is now generating 1,400MW of electricity, and this is set to more than triple in the next three years to 5,000MW, with the largest hydropower project so far in Nepal, the 456MW Upper Tama Kosi coming on stream in July, if it is not delayed again by the lockdown.Other hydroelectricity projects totalling 2,500MW are planned are in the financial negotiations stage, they are set to come into operation by 2026.But the more urgent need is power transmission to accommodate the new projects in the next three years as Nepal struggles to keep up with demand. The current peak demand is 1,150MW, which drops to 700MW at night. Generation capacity also fluctuates during the monsoon and dry season between surplus and scarcity because most of the hydro projects are of the run-of-river type without large reservoirs.To avoid electricity from going to waste during the monsoon, Nepal can export the surplus power to India, and import in winter. The agreements are in place with India to facilitate power trade, but current transmission lines cannot bear future load. The MCC-funded transmission lines are also required for domestic distribution and grid management.The present Dhalkebar-Muzaffarpur crossborder transmission line connects India and Nepal but can only handle 1,000MW each way, but practically it can only bear 800MW. This means by late next year, Nepal’s new surplus monsoon electricity is sure to go waste.This will not just be a wasted opportunity for Nepal to reduce its trade imbalance and partly pay for its winter power import from India, but also affect private hydropower investors in Nepal. This scenario can be avoided if the proposed 400KVa Butwal-Gorakhpur transmission line.The catch here is that the NEA has signed an understanding with the private hydropower investors that it will buy electricity they generate only if the surplus can be exported to India. Any delay in building the Butwal-Gorakhpur transmission line to India, therefore would ultimately impact Nepal’s own private power producers. This put their investment at risk, affect the banking sector, and ultimately Nepal’s overall economy.<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221110131116/636cec279c7e80680e09ad4bjpeg.jpg" alt="" width="946" height="526"><figcaption>Illustration: BHANU BHATTARAI</figcaption></figure>Critics of the MCC have pointed out that exporting power to India is not a priority, and Nepal should use power from the new projects to foster value-added energy-intensive industries in Nepal itself. However, the MCC transmission lines will be needed even to feed power within the country.In addition, at the rate power demand is rising in Nepal, even if 5,000MW is generated in the monsoon, the capacity of the run-of-river schemes will drop to one-third in the dry season – as it has done during this year’s winter drought. The higher capacity transmission lines are therefore required to import power from India until such time as Nepal’s generation capacity in winter is augmented with storage projects like Budi Gandaki.NEA’s Shakya says the MCC project will form a backbone of Nepal’s electricity grid, and by linking it to the Indian grid it will be more robust and flexible, allowing load sharing and management. The MCC-funded transmission lines are also critical for meeting Kathmandu Valley’s future demand growth, to transfer power generated in eastern Nepal to the western half of the country during the monsoon, and from west to east in the winter.Fortunately, electricity supply and demand in Nepal and India complement each other. In summer, when demand rises in India Nepal has surplus power, and in winter when Nepal’s supply cannot meet demand, it can import from India.The same is true within Nepal. There is a nearly one month lag between the time the monsoon arrives in eastern Nepal in early June, and by the time it starts raining heavily in western Nepal in mid-July. This means projects in eastern Nepal are already operating at full capacity, and the surplus electricity can be sent to western Nepal where it is still dry – if there was the necessary east-west transmission system.“The risk that we will have to face in the coming years if this project does not materialise will be unimaginable,” Shakya warns. “If these transmission lines are not built through the MCC grant, we have to immediately start moving towards an alternative.”Good connectivityNepal signed the MCC Compact Agreement in September 2017 which allowed the MCC Board in Washington to release the grant amount of $500 million (Rs59 billion) for the development of Nepal’s electricity transmission line and road infrastructure. But everything has been stuck for more than a year because a provision in the agreement that required ratification by Parliament.The Americans insisted on this clause so that the project would be valid no matter which government was in power in Nepal, but that is also the reason that the MCC has become a punching bag for those against Prime Minister Oli—even though his predecessors in other parties opposing the project were in government when the agreement was signed. The NC leadership which is now in the opposition, as well as NCP leaders that included the Maoist Centre and UML, who are vehemently getting the MCC scrapped today were involved in approving and planning the project.Foreign affairs experts explain that the MCC has been caught up in domestic oneupmanship between Nepal’s leaders and <a href="https://www.nepalitimes.com/editorial/covid-19-and-the-new-great-game/" target="_blank" rel="noopener noreferrer">international geopolitics</a>. Nepal’s politicians have a tendency to be north-facing or south-facing, or both, and are generally not able to work together for the national interest. This is made worse by the absence of trust, and a lack of dignity.<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221110131116/636cec2a9c7e80680e09ad4cjpeg.jpg" alt="" width="750" height="1000"><figcaption>Photo: KUNDA DIXIT</figcaption></figure>The US side has informed the government that the MCC grant is not open-ended and the deadline is looming. However, the MCC has also suffered collateral damage as Prime Minister Oli dissolved the Lower House on 20 December, and then ended the winter session on 19 April. The Special Session has been called for 10 May as Prime Minister Oli seeks a confidence vote. If he loses, the country will go for early elections in six month’s time. The budget session of the House could pass the MCC, but with the intense political polarisation, it will not be easy.Despite the agreement being signed by both governments, therefore, it is languishing because of Nepal’s internal dynamics. The main objection from the detractors is that it is a part of the Indo-Pacific Strategy of the United States, and that several provisions of the agreement undermine the sovereignty of Nepal.Bhim Rawal, a staunch anti-Oli UML leader, as well as Pushpa Kamal Dahal and other Maoist Centre leaders are against the agreement being ratified by Parliament, more because of their opposition to a project Oli is pushing than other reasons. A committee constituted under the convener of UML leader Jhalanath Khanal and others had recommended last year that the agreement be passed with amendments.Though the project has still not got off the ground, it has already spent about $3 million for preparations, which the US and Nepal government have shared half-half. It was used for the mapping and design of the transmission lines, the pylons, sub-stations, and preparing tender documents.The EIA (Environmental Impact Assessment (EIA) report of the overall project is in the final stages. The task of acquiring the land under the project in Ratmate of Nuwakot, where the sub-station will be constructed is nearing completion. The Nepal government has allocated Rs10.3 billion this fiscal year for MCC, but till mid-December only Rs140 million had been spent.

Power politics delays MCC in Nepal

<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109111140/636b84009c7e80680e06776cjpeg.jpg" alt="" width="1500" height="1000"/><figcaption>Illustration: DIWAKAR CHHETRI</figcaption></figure>Nepal's prolonged political deadlock has not just affected the country’s response to Covid-19, it has also delayed the implementation of an American-aided project to upgrade Nepal’s electricity transmission grid.The <a href="https://www.nepalitimes.com/editorial/knowing-whats-good-for-nepal/" target="_blank" rel="noopener noreferrer">controversial</a> Millennium Challenge Corporation (MCC) project is the biggest single bilateral grant for a specific project in Nepal by a foreign country, but <a href="https://www.nepalitimes.com/editorial/a-millennium-challenge/" target="_blank" rel="noopener noreferrer">has become the focus of an intense power struggle </a>rival parties, and is tangled in regional and global geopolitics.A big part of the $500 million MCC grant is ear-marked for the Kathmandu-Hetauda-Butwal 400KVa transmission line which will eventually evacuate electricity generated from existing and new <a href="https://www.nepalitimes.com/opinion/decentralising-hydropower/" target="_blank" rel="noopener noreferrer">hydropower plants</a> on the Budi Gandaki, Trisuli, Kali Gandaki, Marsyangdi, Kosi, and Tamakosi corridors, and link it to Gorakhpur in India. A smaller component of the project will upgrade arterial highways. The Nepal government is putting up another $130 million as a counterpart fund.However, critics in Nepal see the MCC as America’s strategic counter to China’s Belt Road Initiative. The <a href="https://www.nepalitimes.com/editorial/knowing-whats-good-for-nepal/" target="_blank" rel="noopener noreferrer">comment by US Under Secretary of State David J Ranz</a> in 2019 that the MCC was indeed a part of the US <a href="https://www.nepalitimes.com/editorial/between-two-oceans/" target="_blank" rel="noopener noreferrer">Indo-Pacific Strategy</a>added fuel to the fire.Sandwiched between India and China, Nepal was already in a strategic tight spot, but a recent flare-up in Sino-Indian tension and US-China rivalry have caught Nepal in the crossfire. In addition, opponents of Prime Minister K P Oli have weaponised the MCC and used the project to weaken his position.But Nepal’s energy planners say that even if the MCC is delayed or cancelled, the country will have to find alternatives to build the transmission lines.“We cannot afford this uncertainty we must have a Plan B in place, otherwise we will face a huge problem. There will be all this electricity being generated in the next few years, but no way to take it to consumers,” says Hitendra Dev Shakya, who heads the Nepal Electricity Authority (NEA). “We have to build the transmission lines with or without American aid.”The reason behind the <a href="https://www.nepalitimes.com/editorial/a-millennium-challenge/" target="_blank" rel="noopener noreferrer">transmission line being prioritised</a> is to send the electricity produced from throughout Nepal, and any future monsoon surplus can then be exported to India and the same lines can be used to import power in winter if required.New projects with a generation capacity of 330MW are under construction on the Bhote Kosi in Rasuwa and Nuwakot. A further 500MW will be generated from other hydropower schemes whose construction was delayed due to the pandemic.New 220KVa transmission lines are ready to bring that electricity to Kathmandu Valley, but they only have the capacity to carry the new load from projects now under construction. But the NEA has already made Power Purchase Agreements (PPA) to buy about 6,000MW of electricity from private operators, and the distribution of that power will depend on the MCC-funded distribution system. The NEA says it urgently needs another transmission link to bring power from plants on the Tama Kosi to Kathmandu and to eastern Nepal via Hetauda.<img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109111140/636b84039c7e80680e06776djpeg.jpg" alt="" width="880" height="840"><a href="https://www.mcc.gov/where-we-work/country/nepal" target="_blank" rel="noopener noreferrer">The MCC</a> was set up in 2004 by the US Congress during the George W Bush presidency to help developing nations reduce poverty through financial aid. Since then, as Sino-US tensions grew it has taken on a strategic dimension as the two powers compete for global connectivity. The $500 million MCC grant to Nepal was sanctioned in 2017 to improve Nepal’s energy and road infrastructure.Nepal was suffering 18 hours of power cuts a day when the agreement was signed, and after much deliberation, Nepal’s planners, politicians and bureaucrats decided that <a href="https://www.nepalitimes.com/editorial/a-millennium-challenge/" target="_blank" rel="noopener noreferrer">transmission lines were the most urgently needed</a> since powerplants were already under construction. The generated electricity need to be taken to load centres, this would increase the renewable component of Nepal’s energy mix by replacing imported petroleum, and finally, to export any surplus to India.Meanwhile, the <a href="https://www.nepalitimes.com/latest/post-truth-politics-in-nepal/" target="_blank" rel="noopener noreferrer">Millennium Challenge Authority Nepal (MCA-Nepal)</a> has been set up and the office has already finalised the design of the 315km transmission line of 400KVa capacity with three new sub-stations. But the delay in Parliament’s ratification of the project means it cannot issue tender bids, and this will put 2,600MW of electricity at risk of being wasted in eh coming two years.<a href="https://archive.nepalitimes.com/news.php?id=17959" target="_blank" rel="noopener noreferrer">Khadga Bahadur Bista</a>, the CEO of MCA-Nepal estimates about it takes up to five months to select a contractor even if the project is ratified by Parliament, and after that, it will take another nine months to start construction.“We are all set to kick start this project and are ready to call for international tender bids, but due to it still pending in the Parliament we have not been able to make progress,” Bista told Nepali Times. Just Do ItThe NEA says that Nepal is now generating 1,400MW of electricity, and this is set to more than triple in the next three years to 5,000MW, with the largest hydropower project so far in Nepal, the 456MW Upper Tama Kosi coming on stream in July, if it is not delayed again by the lockdown.Other hydroelectricity projects totalling 2,500MW are planned are in the financial negotiations stage, they are set to come into operation by 2026.But the more urgent need is power transmission to accommodate the new projects in the next three years as Nepal struggles to keep up with demand. The current peak demand is 1,150MW, which drops to 700MW at night. Generation capacity also fluctuates during the monsoon and dry season between surplus and scarcity because most of the hydro projects are of the run-of-river type without large reservoirs.To avoid electricity from going to waste during the monsoon, Nepal can export the surplus power to India, and import in winter. The agreements are in place with India to facilitate power trade, but current transmission lines cannot bear future load. The MCC-funded transmission lines are also required for domestic distribution and grid management.The present Dhalkebar-Muzaffarpur crossborder transmission line connects India and Nepal but can only handle 1,000MW each way, but practically it can only bear 800MW. This means by late next year, Nepal’s new surplus monsoon electricity is sure to go waste.This will not just be a wasted opportunity for Nepal to reduce its trade imbalance and partly pay for its winter power import from India, but also affect private hydropower investors in Nepal. This scenario can be avoided if the proposed 400KVa Butwal-Gorakhpur transmission line.The catch here is that the NEA has signed an understanding with the private hydropower investors that it will buy electricity they generate only if the surplus can be exported to India. Any delay in building the Butwal-Gorakhpur transmission line to India, therefore would ultimately impact Nepal’s own private power producers. This put their investment at risk, affect the banking sector, and ultimately Nepal’s overall economy.<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109111140/636b84069c7e80680e06776ejpeg.jpg" alt="" width="946" height="526"><figcaption>Illustration: BHANU BHATTARAI</figcaption></figure>Critics of the MCC have pointed out that exporting power to India is not a priority, and Nepal should use power from the new projects to foster value-added energy-intensive industries in Nepal itself. However, the MCC transmission lines will be needed even to feed power within the country.In addition, at the rate power demand is rising in Nepal, even if 5,000MW is generated in the monsoon, the capacity of the run-of-river schemes will drop to one-third in the dry season – as it has done during this year’s winter drought. The higher capacity transmission lines are therefore required to import power from India until such time as Nepal’s generation capacity in winter is augmented with storage projects like Budi Gandaki.NEA’s Shakya says the MCC project will form a backbone of Nepal’s electricity grid, and by linking it to the Indian grid it will be more robust and flexible, allowing load sharing and management. The MCC-funded transmission lines are also critical for meeting Kathmandu Valley’s future demand growth, to transfer power generated in eastern Nepal to the western half of the country during the monsoon, and from west to east in the winter.Fortunately, electricity supply and demand in Nepal and India complement each other. In summer, when demand rises in India Nepal has surplus power, and in winter when Nepal’s supply cannot meet demand, it can import from India.The same is true within Nepal. There is a nearly one month lag between the time the monsoon arrives in eastern Nepal in early June, and by the time it starts raining heavily in western Nepal in mid-July. This means projects in eastern Nepal are already operating at full capacity, and the surplus electricity can be sent to western Nepal where it is still dry – if there was the necessary east-west transmission system.“The risk that we will have to face in the coming years if this project does not materialise will be unimaginable,” Shakya warns. “If these transmission lines are not built through the MCC grant, we have to immediately start moving towards an alternative.”Good connectivityNepal signed the MCC Compact Agreement in September 2017 which allowed the MCC Board in Washington to release the grant amount of $500 million (Rs59 billion) for the development of Nepal’s electricity transmission line and road infrastructure. But everything has been stuck for more than a year because a provision in the agreement that required ratification by Parliament.The Americans insisted on this clause so that the project would be valid no matter which government was in power in Nepal, but that is also the reason that the MCC has become a punching bag for those against Prime Minister Oli—even though his predecessors in other parties opposing the project were in government when the agreement was signed. The NC leadership which is now in the opposition, as well as NCP leaders that included the Maoist Centre and UML, who are vehemently getting the MCC scrapped today were involved in approving and planning the project.Foreign affairs experts explain that the MCC has been caught up in domestic oneupmanship between Nepal’s leaders and <a href="https://www.nepalitimes.com/editorial/covid-19-and-the-new-great-game/" target="_blank" rel="noopener noreferrer">international geopolitics</a>. Nepal’s politicians have a tendency to be north-facing or south-facing, or both, and are generally not able to work together for the national interest. This is made worse by the absence of trust, and a lack of dignity.<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109111140/636b84089c7e80680e06776fjpeg.jpg" alt="" width="750" height="1000"><figcaption>Photo: KUNDA DIXIT</figcaption></figure>The US side has informed the government that the MCC grant is not open-ended and the deadline is looming. However, the MCC has also suffered collateral damage as Prime Minister Oli dissolved the Lower House on 20 December, and then ended the winter session on 19 April. The Special Session has been called for 10 May as Prime Minister Oli seeks a confidence vote. If he loses, the country will go for early elections in six month’s time. The budget session of the House could pass the MCC, but with the intense political polarisation, it will not be easy.Despite the agreement being signed by both governments, therefore, it is languishing because of Nepal’s internal dynamics. The main objection from the detractors is that it is a part of the Indo-Pacific Strategy of the United States, and that several provisions of the agreement undermine the sovereignty of Nepal.Bhim Rawal, a staunch anti-Oli UML leader, as well as Pushpa Kamal Dahal and other Maoist Centre leaders are against the agreement being ratified by Parliament, more because of their opposition to a project Oli is pushing than other reasons. A committee constituted under the convener of UML leader Jhalanath Khanal and others had recommended last year that the agreement be passed with amendments.Though the project has still not got off the ground, it has already spent about $3 million for preparations, which the US and Nepal government have shared half-half. It was used for the mapping and design of the transmission lines, the pylons, sub-stations, and preparing tender documents.The EIA (Environmental Impact Assessment (EIA) report of the overall project is in the final stages. The task of acquiring the land under the project in Ratmate of Nuwakot, where the sub-station will be constructed is nearing completion. The Nepal government has allocated Rs10.3 billion this fiscal year for MCC, but till mid-December only Rs140 million had been spent.

<img width="640" height="350" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109181156/636bea2e9c7e80680e087903jpeg.jpg" alt=""/>A combination of low river flow, high winter power demand and old-fashioned mismanagement have meant that Nepalis are once more suffering from <a href="https://www.nepalitimes.com/here-now/the-cost-of-light/" target="_blank" rel="noopener noreferrer">power cuts.</a> Forced to bring out the candles once more, Nepalis have taken to social media to pour their outrage at the government for <a href="https://www.nepalitimes.com/here-now/kulman-ghisings-tenure-at-nea-in-doubt/" target="_blank" rel="noopener noreferrer">not renewing the tenure of Kulman Ghising</a>, the head of the Nepal Electricity Authority (NEA) who was credited with ending ‘load shedding’ after he was appointed in 2016.The return to power cuts follows Ghising stepping down in September, and the current political crisis. Energy Minister Barsha Man Pun, who is a Pushpa Kamal Dahal loyalist, was among seven Cabinet ministers who resigned to protest Prime Minister K P Oli’s dissolution of the House on 20 December.Nepalis used to suffer up to 16 hours of power cuts a day during some of the worst periods between 2006-2016. An <a href="http://archive.nepalitimes.com/article/nation/corruption-in-electricity-industry-of-Nepal,3408" target="_blank" rel="noopener noreferrer">investigation by this newspaper</a> had shown that it was largely because of NEA officials and the head of the load distribution centre being paid off by industries to provide them dedicated 24-hour electricity feed.  <figure><img width="1050" height="629" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221109181156/636bea309c7e80680e087904jpeg.jpg" alt=""><figcaption>Kulman Ghising was credited with ending the loadshedding after being appionted NEA head in 2016.</figcaption></figure>As a result, electricity was rationed for households across the country and the remaining supply could not keep up with demand. Things got worse in winter when Nepal’s run-of-the-river schemes could not generate their optimum power. After Ghising took over the NEA, he <a href="http://archive.nepalitimes.com/article/editorial/Power-struggle-Kulman-Ghising,3399" target="_blank" rel="noopener noreferrer">cut off the dedicated feeds</a> and redistributed the saved power to the public. He also slapped a bill to the industries for a backlog of payments, and it is thought that these powerful individuals then pressured the Oli government not to renew Ghising for four more years.Ghising was also lucky because his tenure coincided with new private power producers generating hydroelectricity, and an import agreement with India. But he also launched an aggressive campaign to upgrade the grid, reduce system loss and pilferage from 26% to 15% during his tenure, and manage the grid more efficiently.   However, NEA spokesman Madan Timsina said electricity supply has been interrupted because of poorly maintained transmission lines. “This is not load shedding, yes generation capacity cannot keep up with peak demand in the mornings and evenings sometimes, but the situation has not got to a point where we have to ration power,” he told Nepali Times.  However, an official at the NEA load centre told us that on Monday, the demand for electricity reached 1,434MW which is about 500MW more than the dry season generation capacity. Usually, this deficit is being met by <a href="https://www.nepalitimes.com/from-the-nepali-press/more-than-half-of-nepals-electricity-imported-from-india/" target="_blank" rel="noopener noreferrer">imports of thermal power from India.</a>  Every evening this week, the load centre has been struggling to provide uninterrupted electricity supply but has not always succeeded. The NEA official said: “When there is just no other alternative, we cut off the supply for between 15-20 minutes in each locality just to manage the load. This is not a new thing.” This week, Kathmandu Valley’s peak demand hit 377MW, which is actually 50MW less than last year. The reason is the economic slowdown due to the pandemic. Yet, the NEA is finding it difficult to meet even that lessened demand.    “Our transmission lines, distribution network and transformers and are old and they cannot meet high demand, that is why there are sometimes problems on those lines and we have to cut power,” Timsina added. The peak hours in winter for power demand at between 6-7pm, when people are using electricity for cooking and heating, or plug in television and other appliances. It has not rained since September, and the rivers receded,  lowering the electricity available.  Since Nepal has only one reservoir-based power plant at Kulekhani, there is no backup when supply does not meet peak demand. Although private power producers in Nepal have an installed capacity of 725MW, these weeks they have not been able to generate even half of that. NEA’s own plants like Kulekhani, Kali Gandaki and others are producing 500MW. The NEA has been importing 600MW of electricity from India to meet the shortfall in the evenings this week. The utility expects the situation will to improve only in February after the winter rains arrive, and the snow starts melting with warmer weather.  The irony is that NEA and private hydropower plants can generate up to 1,400MW during the monsoon, which this year has exceeded demand reduced during the pandemic. In fact, this monsoon Nepal <a href="https://www.nepalitimes.com/latest/nepal-power-glut-with-covid-19-shutdown/" target="_blank" rel="noopener noreferrer">actually exported some power to India</a> in July-August, and lot of electricity was wasted as ‘spill’ during the night time. The NEA’s head of Customer Service said the reason for power cuts this week was because of a weak distribution system, and not undersupply. He said: “Sometimes there is an overload in some neighbourhoods, and sometimes in others, and the system cannot handle it, leading to breakdowns in supply.” The other reason is the delay in bringing a crucial 132kVA transmission line in the southern edge of the Valley from Thankot to Chapagaon and Bhaktapur because of local opposition. This means it is difficult to keep the system stable – especially through lines feeding parts of Patan and Baneswor.   This contradicts the statement to us by the official at the NEA’s own load centre who has blamed a shortfall in supply. Whatever the truth, the Nepali public seems to have made up its mind that the ‘power mafia’ working in cahoots with the government kicked out Kulman Ghising because he was becoming too popular. And without him the country has gone back to 'the dark ages'.

Power cuts are back in Nepal

<figure><img src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221108151128/636a67bb9c7e80680e0599f2jpeg.jpg" alt="" width="3000" height="1668"/><figcaption>Illustration: BHANU BHATTARAI</figcaption></figure>It is the biggest amount granted to Nepal for a specific project by a bilateral development partner. But the Millennium Challenge Corporation (MCC) project <a href="https://www.nepalitimes.com/editorial/a-millennium-challenge/" target="_blank" rel="noopener">has become the centre of a row</a> between two factions of the Nepal Communist Party, and stalled proceedings at the Central Committee meeting of the ruling party last week, raising questions about Nepal’s credibility.The major chunk of the grant is supposed to be spent on the Kathmandu-Hetauda-Butwal 400KVa transmission line which will eventually evacuate electricity generated from <a href="https://www.nepalitimes.com/opinion/decentralising-hydropower/" target="_blank" rel="noopener">hydropower plants</a> on the Budi Gandaki, Trisuli, Kali Gandaki, Marsyangdi, Kosi, and Tamakosi corridors. Another component will go for upgrading key highways.Read also: <a href="https://www.nepalitimes.com/editorial/a-millennium-challenge/" target="_blank" rel="noopener">A millennium challenge</a>, EditorialHitendradev Shakya, a transmission line specialist says this power link will form the backbone of Nepal's national grid. "It is imperative that Nepal starts building this, with or without American aid," he says.Hydropower projects that will produce a total of 330MW power are under construction in Rasuwa and Nuwakot on the Bhote Kosi, and a further 500MW of electricity will come from schemes under construction. Transmission lines for 220KVa have already been built to feed the power to Kathmandu Valley, but these will only serve power plants under construction. More transmission lines will be needed for future power plants, and also for possible export to India. If not, electricity generated, especially during the monsoon, could go waste.The Nepal Electricity Authority (NEA) has already made Power Purchase Agreements (PPA) to buy about 6,000MW of electricity from private operators, but the transmission lines to distribute it are lagging behind. NEA wants another transmission link to bring power from plants on the Tama Kosi to Kathmandu and to eastern Nepal via Hetauda, and export the surplus to India through Butwal.Read also: <a href="https://www.nepalitimes.com/banner/nepal-in-2030/" target="_blank" rel="noopener">Nepal in 2030</a>, Sanghamitra SubbaHowever, at the NCP Central Committee last week there was intense debate between those for and against the MCC. Some prominent leaders like Bhim Rawal, Deb Gurung and Yogesh Bhattarai objected to the MCC on grounds that it was a part of the <a href="https://www.nepalitimes.com/editorial/between-two-oceans/" target="_blank" rel="noopener">US Indo-Pacific Strategy</a> that they see as being directed against China.The meeting could not come to an agreement, and decision on it was passed to the party secretariat. Some said the sabre rattling in the Central Committee was just populist posturing to appear nationalist.<a style="background-color: #ffffff; font-size: 15px; letter-spacing: 0.01em;" href="https://www.mcc.gov/where-we-work/country/nepal" target="_blank" rel="noopener">The MCC</a> was established in 2004 by the US Congress to help developing nations reduce poverty through financial aid. In August 2017, the MCC Board in the US approved a $500 million grant to Nepal to improve Nepal's energy and road infrastructure.Experts say that arguing about a bilateral project already agreed upon could raise questions about Nepal’s credibility in the international arena. Whether or not MCC is a part of America's Indo-Pacific Strategy is an old debate, and Minister for Foreign Affairs Pradeep Gyawali has maintained it is not. He visited Washington DC last year and met Secretary of State Mike Pompeo to push the project forward."Either the leaders should give alternatives, or stop objecting to this grant,” says economist Biswa Poudel.This year several high-profile American officials have visited Nepal, including the Indo-Pacific Commander Philip A Davidson, Deputy Assistant Secretary Joseph Felter, and Deputy Assistant Secretary of State for South Asia David J Ranz. The visits have bolstered the view that the MCC is indeed a US move to counter China’s Belt Road Initiative in Nepal. In fact Ranz actually admitted to the Nepali media that it was.Read also: <a href="https://www.nepalitimes.com/here-now/nepal-now-has-to-balance-not-just-india-and-china-but-also-the-west/" target="_blank" rel="noopener">Nepal now has to balance not just India and China, but also the West</a>, Bhairaja PandayLast June, a report by the American Department of Defence identified the Indo-Pacific Strategy as a military move to project American power in the Pacific and Indian Oceans and a pillar of American foreign policy in the region.However, international relations expert Tika Dhakal believes the MCC should be separated from American military strategy: "It is not beneficial for Nepal to be a part of the military gameplan of a foreign power, and America should not include MCC under its Indo-Pacific strategy."The other sensitivity to Nepal is that the transmission line link to India could make Nepal even more dependent on its southern neighbour. "No aid comes without strings attached. But the Nepal government should be clever enough to use aid like this for its own benefit,” Dhakal says.Another controversy surrounds a clause in the agreement that the project must be ratified by Nepal's Parliament. The Cabinet had planned to table it in the House last year, but ex-Speaker Krishna Bahadur Mahara did not include it in the list of subjects, allegedly on purpose.Khadga Bahadur Bista of Millennium Challenge Nepal Development Committee says that if it is not approved in the ongoing winter session of Parliament, the project may be dropped. "It is due to start end-June 2020. If Parliament does not approve it now, it will be difficult to stick to that date.”Even those in favour of the MCC say Nepal should not have accepted the clause about Parliament ratification. The other sticking point may be to get India’s prior approval for the 400KVa transmission line. The MCC Compact states that if the project is not finished in five years, the money goes back to the US treasury, and the delays could scuttle the project.

transmission-lines

Missing pieces of the hydropower jigsaw

MCC risks split in Nepal’s ruling coalition

The cost of no MCC

MCC ball in Nepal’s court

MCC row rocks Nepal’s ruling coalition

MCC: damned if we do, damned if we don’t

Power politics delays MCC in Nepal

Power politics delays MCC in Nepal

Power cuts are back in Nepal

MCC row damages Nepal's credibility