Explainer-Why is a US infrastructure grant behind protests in Nepal?

By Gopal Sharma

KATHMANDU (Reuters) – Nepal’s parliament is set to begin debates on Thursday on an agreement for a $500 million grant from the United States, with a vote that could break the governing alliance led by Prime Minister Sher Bahadur Deuba, who took over in July last year.

The agreement has triggered widespread street protests and political parties, including members of the ruling coalition, are divided over the grant.

WHAT IS THE GRANT?

The Millennium Challenge Corporation (MCC), a U.S. government aid agency, agreed in 2017 to provide a $500 million grant to fund a 300-km (187-mile) electricity transmission line and a road improvement project in Nepal.

The grant is part of an international agreement and is to be governed by the principles of international law.

Nepal will contribute an additional $130 million to the project.

The projects under the grant will be managed by the Millennium Challenge Account Nepal Development Board (MCA-Nepal), the primary agency of the government to oversee the projects.

The chairman and members of the board are nominees of the Nepali government which must ensure that its decisions are not modified, supplemented, influenced or rescinded.

WHAT WILL THE GRANT BE USED FOR?

The money will go toward the maintenance of road quality across the Himalayan nation, and the construction of a high-voltage electricity transmission line to improve the availability and reliability of power to domestic consumers and help power trade with neighbouring India.

The transmission line is expected to spur investment for the utilization of Nepal’s abundant hydro-electric potential to generate up to 40,000 megawatts of clean energy.

The Nepali government and the United States say the grant comes without any conditions and the money does not need to be repaid nor will bear any interest.

WHY THE OPPOSITION?

Opposition comes predominantly from Nepal’s communist parties, some of which are in coalition with the ruling centrist Nepali Congress. They have long sought closer ties with China.

They say the agreement would undermine Nepal’s laws and sovereignty, and the country will not have sufficient oversight of the board overseeing the MCC funded projects.

Critics see the grant as part of Washington’s Indo-Pacific strategy and allege it could have a military objective.

In the past week, thousands of stone-throwing protesters, prominently from the youth wings of communist parties, have clashed with riot police who have fired teargas and used water cannons and batons to stop them from marching on parliament.