Despite clearing their tax dues, internet service providers (ISPs) in Nepal are facing delays from the Ministry of Communications and Information Technology in recommending foreign currency exchange. This comes amid mounting pressure from upstream service providers and increases the risk of an internet shutdown.

“Even though we have cleared our dues, we have not received the recommendation from the communication ministry for foreign currency exchange to pay our upstream service providers. The upstream providers are pressuring us, questioning why they have not been paid yet despite the dues being cleared, but the government is not taking action,” said Parajuli.

Internet service providers report that upstream service providers are running out of patience.

“We cleared the dues on January 10 following the Supreme Court's order, and our licence was renewed on January 12. The Nepal Telecommunications Authority (NTA) recommended foreign currency exchange to the communication ministry in January,” said Parajuli.

However, tax dues for the period from mid-December to mid-January surfaced, yet the NTA still recommended the communication ministry approve foreign exchange.

Despite this, the ministry has withheld its recommendation, citing the outstanding month's dues, Parajuli added.

“We cleared eight years of dues within one-and-a-half months after the court order. We do not understand what the government wants,” said Parajuli.

Parajuli mentioned that by mid-January, ISPs must clear all yearly payments or face a 2 percent fine. Despite clearing the bulk of old dues and committing in writing to pay the remaining within three months, the ministry remains unconvinced.

“It seems the government wants to shut down the internet,” Parajuli said.

Radhika Aryal, secretary at the communication ministry, said the issue might still be in process within the relevant division of the ministry, as she has not yet received the file for approval.

On February 2, internet users across Nepal experienced a complete service shutdown for nearly an hour, causing widespread disruption.

While the initial cause of the outage was unclear and suspected to be linked to unpaid dues, it was later revealed to have been caused by fibre cuts in Airtel’s network in Birgunj and Bhairahawa, lasting 47 minutes.

Nepal owes around Rs8 billion to Indian upstream providers, including Airtel and Tata. Airtel supplies 70 percent of Nepal's internet, while Tata provides 20 percent, accounting for 90 percent of the country’s internet services.

On May 2, 2023, Airtel cut services due to unpaid dues, only restoring them after Nepal’s telecom regulator, the NTA, promised to resolve payment issues. The disruption began at 5 pm and lasted for five hours.

Indian vendors have repeatedly warned about the overdue payments.

Last year, senior Airtel officials visited Nepal to discuss the issue with government authorities. They warned of further disruptions if ISPs fail to settle their dues and obtain foreign currency exchange approvals.

ISPs argue that a previous ruling by the parliamentary Public Accounts Committee exempted them from paying specific fees, such as royalties and contributions to the Rural Telecommunications Development Fund (RTDF).

However, in May 2023, the Supreme Court dismissed a writ petition from WorldLink Communications, ruling that ISPs must pay taxes collected from customers.

To date, WorldLink and Subisu have cleared their dues, while Vianet is in the process of completing payments. The NTA reports that 70 percent of ISPs have settled their debts, while 30 percent still have outstanding payments.

A former parliamentary Public Accounts Committee had previously ordered the government to exempt ISPs from paying taxes on non-telecom components, including web services, co-location, hosted services, disaster recovery, managed services, data centres, and cloud services.

The committee stated that ISPs would not be required to pay royalties and RTDF charges for three fiscal years—2017-18, 2018-19, and 2019-20.

However, the auditor general, Nepal's constitutional body and supreme audit institution, argued that these fees should not have been waived and instructed the government to recover the charges. As a result, the government ordered ISPs to clear the dues.

The current parliament’s Public Accounts Committee has directed the Ministry of Communications and Information Technology to recover the outstanding dues from ISPs.

According to the NTA, WorldLink Communications cleared Rs2.15 billion in dues, including Rs1.38 billion as royalty and Rs762.39 million for the RTDF in November last year.

In January, Subisu Cablenet settled its royalty dues of Rs174.85 million and RTDF charges of Rs138.91 million.

Vianet Communication has paid around Rs320 million and has an outstanding balance of Rs120 million, which it is in the process of clearing.