KATHMANDU (Reuters) -Nepal's parliament approved a U.S. infrastructure grant of $500 million which critics say undermines the Himalayan nation's sovereignty as protesters opposed to the proposed funds clashed with police, officials and witnesses said on Sunday.

       Paliament Speaker Agni Sapkota said the aid agreement was approved by a majority vote of the Nepali lawmakers.

       The Millennium Challenge Corporation (MCC), a U.S. government aid agency, agreed in 2017 to provide the aid in a grant to fund an electricity transmission line and road improvement project.

       The aid does not need to be repaid and Washington says it comes without conditions.

       Major political parties, including those in the ruling coalition, were divided over whether to accept the grant.

       Opponents, wary of U.S. influence, said the aid would undermine Nepal's laws and sovereignty as it will not have sufficient control over the projects.

       "The agreement will bring Nepal under the security umbrella of the United States and should be rejected," Bhim Rawal, a member of the opposition Nepal Communist Party (Unified Marxist-Leninist), had told parliament.

       Finance Minister Janardan Sharma had assured deputies that the aid would not undermine Nepal's constitution and laws, it was not part of Washington’s Indo-Pacific strategy and had no military objective.

       "It will promote the interest and welfare of the country and should be accepted," Mahant Thakur, a deputy of the Loktantrick Samajwadi Party, said during the debate.

       Hundreds of protesters opposed to the aid clashed with police who used teargas, water cannon and rattan sticks to disperse them and stop them marching on parliament, witnesses said.

       (Reporting by Gopal Sharma, editing by Ed Osmond)