The U.S.-based Millennium Challenge Corporation (MCC) says it is there to do the "business of kindness." But Nepal, which has qualified for a $500 million aid from the U.S. independent aid agency, is not convinced. In fact, the confusion and din over the U.S. funding have been going on in the landlocked Himalayan country for five years.

The funds do not need to be repaid, and they come with no strings attached, the U.S. has claimed repeatedly. But political parties, mainly the communists, say that the funding is part of the U.S. administration's Indo-Pacific Strategy (IPS) which is all about containing a communist China.

On Feb. 16, Nepal police used teargas and water cannon to quell the violence which was directed against the MCC aid, for which Nepal agreed in 2017.

Around 3,000 protesters from various communist factions took to the street and in the capital Kathmandu 123 activists were detained and nine police personnel were hurt in the melee.

Since its inception in 2004, MCC, the U.S. development agency, has invested $15 billion in 29 developing countries and "has improved the lives of more than 200 million people," claims its website.

The MCC came into being through an act of the U.S. Congress to economically empower poor nations and to reduce global hostility towards the U.S. administration following the 9/11 terror attacks in 2001.

The MCC was created to bypass the traditional American bilateral aid body, USAID, which is mired in red tape. Nepal became the first country in South Asia to be eligible for the grant in 2014 and a pact, which insists on approval from the country's parliament, was signed three years later.

The fund will be set aside for building Nepal's infrastructure such as electric transmission lines and the improvement of national highways. There is a plan to sell surplus power to India, a member of QUAD which is aimed at curbing Chinese influence in the Indo-Pacific region.

The allegation that the MCC is against the national interests of Nepal arises from the compact's Article 7.1, which states: "The Parties understand that this Compact, upon entry into force, will prevail over the domestic laws of Nepal."

As Nepal has been dragging its feet, the U.S. has threatened to terminate the deal unless it is okayed by Parliament by February-end.

Dilendra Prasad Badu, Minister for Parliamentary Affairs, said the efforts are on to forge an agreement to introduce the U.S.-aid proposal in the Parliament.

"We aim to find a common ground for taking the proposal to the parliament for deliberations," Badu said.

Prime Minister Sher Bahadur Deuba and its ruling ally Communist Party of Nepal (Maoist Centre) Chairman Pushpa Kamal Dahal 'Prachanda' have decided to hold a meeting of the ruling coalition before presenting it in the Parliament. The CPN (Maoist Centre) is against the aid, claiming it will hurt national interests.

The proposal was supposed to be tabled in the 271-member Parliament on Feb. 16, but was deferred due to clashes between protesters and police. Only 61 lawmakers of the ruling party, the Nepali Congress, and 13 members of the Loktantrik Samajbadi Party (LSP) currently back the aid proposal without any amendments.

Other ruling alliance members, including CPN-Maoist Centre and CPN-Unified Socialist, led by Madhav Kumar Nepal, have expressed their reservations.

Prime Minister Deuba wants the aid before the elections while coalition partners want to take up the MCC grant after the polls. In any case, the U.S. aid package is set to dominate and will become an electoral agenda in the polls this year.

The U.S. has repeatedly said that the project has no military implications and predates the evolution of the Indo-Pacific strategy.

If the U.S., the largest bilateral donor for Kathmandu for decades, terminates the project, it would adversely affect Nepal's economy. The U.S. is of the view that China is behind the disinformation campaign against the aid package.

Earlier, U.S. assistant secretary of state Donald Lu raised the issue during separate telephonic conversations with Prime Minister Deuba, Prachanda, and main Opposition CPN-UML chairman K P Sharma Oli.

Lu further warned that "it would consider China's interest behind Nepal's failure to ratify the compact."

Nepal and China have come closer over these years and the Himalayan nation joined China's mega infrastructure project Belt and Road Initiative (BRI) in 2017.

Nepal, a 29.47 million country, has been caught in the strategic rivalry between China and the U.S. (and India) which is more gruesome than made out to be.

It is now up to Nepal whether to side with the democratic world represented largely by the U.S. and India and improve its global standing or go to the Chinese camp and reap gains from the Chinese economic boom.