Kathmandu - The United States is preparing to terminate the Millennium Challenge Corporation (MCC) grant program, leading Nepal to plan the transfer of MCA Nepal, the agency overseeing the project, under the Nepal Electricity Authority (NEA).

MCC, launched two decades ago to reduce poverty and promote economic growth, is being shut down by Elon Musk’s Department of Government Efficiency (DoGE).

 Nepal had ratified the MCC agreement, which aimed to construct a 315-kilometer, 400kV cross-border transmission line from Butwal to Gorakhpur, India, and upgrade 40 kilometers of roads. Of the total $697 million required, MCC pledged $500 million, with the remainder to be funded by Nepal.

Following growing uncertainty, the Ministry of Finance has drafted plans to shift MCA Nepal’s projects under NEA management. 

A Finance Ministry official stated that construction must continue to strengthen Nepal’s electricity trade with India, even without MCC funding. ' Once MCC’s official termination letter arrives, MCA Nepal, currently operating from the Yak and Yeti Hotel, will be dismantled, and its responsibilities absorbed by NEA.'

MCA Nepal has already signed major contracts, including a $12.36 million agreement with Transrail Lighting Limited to construct an 18km section of the transmission line. Initial payments totaling Rs 167.9 million have been made. Substation construction projects have also been awarded to India’s Techno Electric and Engineering Company and Linxon India, with substantial advance payments. Additionally, the Lamahi-Butwal road upgrade project is set to move under the Department of Roads.

Amid mixed reports suggesting that some MCC projects in select countries might continue, Prime Minister KP Oli urged caution during a CPN-UML Parliamentary Party meeting. 

He emphasized that Nepal should not rely heavily on uncertain prospects. While noting that unilateral cancellation would undermine international diplomatic norms, Oli asserted that Nepal must remain resilient and move forward despite challenges.

 He reminded that the MCC agreement had been ratified by both the U.S. Senate and Nepal’s Parliament and that land acquisition and preliminary works had already been completed.

The decision to terminate MCC stems from broader efforts by the Trump administration to enhance public spending efficiency. 

Although some U.S. media outlets quoted MCC officials suggesting ongoing projects in four countries could continue, Oli underlined the importance of preparing for a worst-case scenario. 

Nepal, he said, would confront the situation firmly without despair, ensuring national interests are safeguarded.