Twenty factories operating across the country's industrial estates remain without electricity and water after failing to clear outstanding dues, despite a wider payment drive that has restored services to most defaulting industries.

Industrial Zone Management Ltd (IZML), the state-owned body that manages the country's industrial estates, disconnected electricity and water supplies to 167 factories across 10 industrial estates from June 18 over unpaid rent and service charges, including fees for land, buildings, water and electricity.

While services have since been restored to companies that settled their arrears, 20 factories remain cut off, IZML general manager Padam Oli said.

"The electricity and water connections of five factories were restored on Monday after they cleared their dues. The remaining defaulters are still disconnected," Oli said.

The company has so far recovered Rs467.31 million in outstanding payments.

IZML had issued a public notice on June 8, giving industries seven days to clear their arrears or face disconnection. Factories that had failed to pay increased lease rents as well as utility charges had both electricity and water services suspended.

Before the recovery campaign began, industries operating across the country’s industrial estates owed more than Rs890 million in unpaid rent and service charges.

Among the factories still without electricity are eight in the Hetauda Industrial Zone, three in Nepalgunj, three in Pokhara, two each in Balaju and Dharan, and one each in the Patan and Gajendra Narayan Singh industrial zones.

The payment dispute stems from a controversial rent hike introduced by IZML in 2022, which was made effective retrospectively from 2018. Lease rates in some estates rose sharply, with rents in the Balaju Industrial Zone increasing by as much as 686 percent.

Industrialists challenged the decision in court.

In April 2024, the High Court ruled that industries were liable to pay the revised rent from 2018, backing IZML's position. Factory owners then appealed to the Supreme Court.

On March 25, 2025, the Supreme Court partially overturned the High Court's ruling, holding that applying the rent increase retrospectively from Shrawan 2075 BS (mid-July to mid-August 2018) was neither lawful nor justified. Instead, it ordered that the revised rates should take effect only from July 6, 2022.

Despite the ruling, IZML's board of directors decided on January 9, 2026, to seek a review of the verdict, arguing that implementing it would require refunding or adjusting four fiscal years of lease payments and would significantly reduce the company's annual revenue.

The Federation of Nepal Industrial Estate Industries and other business groups also filed review petitions, saying they were dissatisfied with IZML's decision.

However, a Supreme Court bench comprising Justices Binod Sharma, Sunil Kumar Pokharel and Nityananda Pandey rejected the review petitions, leaving the March 2025 verdict in force.

Since then, industries have been required to pay the revised lease rates only from July 2022.

Oli said IZML was collecting arrears strictly in line with the Supreme Court's decision.

"We are recovering unpaid rent based on the revised rates applicable from 2022, as directed by the Supreme Court. Some industries also have older unpaid dues unrelated to the rent revision, and those are being recovered as well," he said.

According to IZML, the failure to collect outstanding payments has directly affected its ability to build and maintain infrastructure inside industrial estates and provide basic services to tenant industries.