How MCC could become a means for Nepal’s rural development

MCC projects can play a pivotal role in enhancing the rural economy and creating jobs, thereby contributing to the rural development of Nepal in the process.

Avyash Shiwakoti

  • Read Time 4 min.

The $ 500 million Millennium Challenge Corporation (MCC) grant given to Nepal by the US government is meant for fighting poverty in underdeveloped or developing countries like Nepal. The MCC was created by the US Congress in January 2004. It has completed its projects in more than 30 countries and it has its ongoing projects in more than 20 countries.

MCC and Nepal government signed the Nepal Compact on September 4, 2017 to “increase domestic electricity consumption by expanding and strengthening the high voltage electricity transmission network which includes the construction of approximately 300 kilometers of high voltage power lines including a link to the Indian border” and to construct three substations to help transform power from one voltage level to another for further transmission or distribution to customers and to increase access, reliability, and productive use of electricity within project-affected municipalities.

How MCC benefits

The goal of the MCC is deeply linked with Nepal’s rural development initiative. By definition, rural development is the process of enhancing the quality of life of the people residing in rural areas with the use of available natural resources like forest, land and water. This creates a base for small-scale industries, raises employment opportunities, results in economic growth, and helps raise the living standards of people. The small-scale industries such as agribusiness, horticulture, forest-based business, fisheries, animal husbandry etc can be instrumental in eradicating poverty.

Since the MCC is mainly focused on areas of electricity development and transportation infrastructure, MCC can also help in rural development. Since its establishment, MCC has worked in irrigation, water source management, and economic growth in various poor countries like Senegal, Tunisia and Zambia. In Peru and Lesotho, it helped to increase immunization rates of children in rural areas against diseases like measles, diphtheria, and tetanus and strengthen the health care system and its ability to deliver quality services. In countries like the Philippines and Morocco, MCC has helped to set up small-scale industries like agribusiness, fisheries, and others and modernize those industrial sectors to improve welfare in rural areas suffering from poverty. It has worked with the governments of El Salvador, Nicaragua, Mozambique, and Ghana to upgrade roads and increase connectivity with the marketplace thereby reducing transportation costs, increasing access to the market, and raising income for farmers. MCC has successfully completed its projects in Mali and Burkina Faso. In the process, agricultural production and productivity increased resulting in improvement in the rural economy and job creation.  It has also helped rural people gain training in agricultural production, management skills, marketing technique, business skills and market risks management practices in countries like Honduras and Madagascar.

In Tanzania, MCC has successfully completed transmission line projects, similar to the ones Nepal is supposed to start with but which Nepal has failed to realize due to its failure to grant parliamentary approval to the Compact.

The $500 million provided to Nepal is for the construction of 300 kilometers long transmission lines which will also have three substations to lower the voltage and distribute electricity for the household as well as industrial purposes to the area nearby.

Prospects for Nepal

Nepal is rich in water resources and we have abundant hydropower potentials. Currently, we have 1095 MW (including diesel and solar) and if everything goes as planned, some 300-400 MWs will be produced within a year or two and more will be added in the years to come. Nepal is producing enough electricity but we don’t have the infrastructure for its fair distribution. The high voltage current produced must be transmitted from the production sites to distribution sites which is challenging for countries like Nepal with hilly and mountainous terrains. This is where proposed transmission lines under the MCC projects will be of huge significance for Nepal.

The current Managing Director of Nepal Electricity Authority (NEA) said on the day of commencement of his second tenure that his main focus would be on domestic consumption and selling of electricity to India. But as things stand, we either have very few transmission lines or building such lines will either be too costly or too time taking.  The perennial delay has been a key characteristic of our big projects. For example, the construction bid for transmission lines of Upper Tamakoshi was awarded in 2011 but it was not completed until 2021 when electricity production started

The goal of the MCC is deeply linked with Nepal’s rural development initiative, as it is mainly focused on areas of electricity development and transportation infrastructure..

MCC is expected to break this cycle of delay, for it has proposed to complete the transmission line projects within five years. Besides, these transmission lines will be crucial in selling Nepal’s excess electricity to India.

Small hydro projects such as Sipring Khola, Tallo Khare, Charnawati, Jiri Khola and Singati are based in the same district where Upper Tamakoshi is located. Together they account for the generation of approximately 75 MW of power. These projects would never be built had there not been the Upper Tamakoshi project because nobody would build a transmission line as it would cost more than the projects themselves.

This shows the importance of transmission lines for Nepal. All these projects are based in rural areas of Dolakha district, a rural district of Nepal. One can imagine the benefits the locals get from these projects through transportation, telecommunication, health care services apart from economic and educational benefits.

Since building transmission lines requires a lot of human resources, this automatically generates employment opportunities in rural areas as transmission lines mostly pass through rural areas. Roads will be built, unproductive and barren lands will come into use. Locals will benefit from the compensation money they receive, which, in turn, will contribute to raising the economic status of the people.

Thus the MCC projects can play a pivotal role in enhancing the rural economy, creating jobs, and use of local resources, thereby contributing to the rural development of the country in the process.

Avyash Shiwakoti is a student of Rural Development at RR Campus, Kathmandu.

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