For nearly two years, Nepali Internet Service Providers (ISPs) have faced delays in paying Indian upstream service providers, mainly Tata and Airtel, due to a tax and royalty dispute. This issue has caused concerns about a potential internet shutdown in Nepal, as the country heavily relies on Indian providers. While the Supreme Court of Nepal has determined that ISPs must pay outstanding taxes, the full text of the verdict is still awaited, making it unclear how much ISPs owe. In the meantime, payments to Indian providers remain stalled, further complicating the situation.
The delays stem from a dispute over royalties and charges to the Rural Telecommunications Development Fund (RTDF), which ISPs argue were waived for three fiscal years by a parliamentary Public Accounts Committee. However, Nepal’s Auditor General disputed this exemption, leading the government to demand that ISPs clear their dues. The outstanding amount owed by Nepali ISPs totals over NRs 6 billion, with major providers like Tata and Airtel supplying 90% of Nepal’s internet service. Airtel already cut off service for five hours in May due to unpaid dues, warning of future disruptions if payments are not resolved.
The government has expressed concerns about the limited alternatives to Indian upstream providers, with the Ministry of Communication and Information Technology ruling out additional upstream services from China. Transitioning to Chinese providers would take years due to existing infrastructure built on the Indian side. The government is expected to provide foreign exchange services to ISPs once the full court ruling is released, allowing them to settle their outstanding payments to Indian providers and prevent further service disruptions.
