Most of the phones sold in Nepal are imported from China and India followed by Vietnam. The rise in legal imports has also been attributed to the immobilisation of the grey market by virus restrictions.

Nepal imported mobile phones worth Rs24.06 billion in the first seven months of the fiscal year 2020-21, an 84.67 percent year-on-year jump.

Traders said imports nearly doubled even though the economy flatlined due to the coronavirus, and tens of thousands lost their jobs. One reason why smartphone sales swelled is that students had to attend online classes due to the virus threat, traders said.

The rise in legal imports has also been attributed to the immobilisation of the grey market by Covid-19 related restrictions.

According to the Department of Customs, the country imported 4.36 million mobile sets in the first seven months of the current fiscal year that began mid-July.

The government collected Rs3.80 billion in customs and tax revenue from mobile imports during the period.

Sanjay Agrawal, vice-president of the Mobile Phone Importers’ Association, said that there was a significant rise in government revenue collection after the grey market was snuffed out following travel and transportation bans.

“Mobile sets used to be imported through illegal channels before, but the closure of the border and air transport, particularly in India, shut them down.

Under the air bubble arrangement, which allows airlines of two countries to operate services between them by complying with safety protocols, Nepal and India re-started regular flights in mid-December. All land entry points were opened in January-end.

Traders said that the grey markets in other countries also disappeared due to various restrictions.

Agrawal said that the spread of online education too helped to push up demand for mobile phones. “But demand has started to slow of late with schools and colleges re-opening.”

Agrawal said the decline could be the result of the re-opening of the borders which allowed the flow of contraband to resume. “Prices are stable and they have not increased recently," he added.

According to Agrawal, no official figures exist, but almost 40-50 percent of the mobile phones sold in the country are believed to be imported through grey channels.

During the lockdown, the grey market lost its supply lines after the Indian border was closed, and customers turned to legitimate sellers, pushing up demand.

Grey market mobile phones come especially from India in hand baggage, and no customs duty is paid on them. Many travellers also bring phones for their friends and relatives, according to domestic mobile dealers.

Mobile sales have been swelling at the rate of 20-30 percent annually, but this year the lockdown boosted sales by 200 percent, said mobile phone dealers.

Sales of mobile sets saw a sharp growth during the lockdown with most educational institutes offering online classes.

Most of the phones sold in Nepal are imported from China and India followed by Vietnam.

Three years ago, the government had announced a plan to implement the Device Identification Registration and Blocking System to eliminate the grey market, but the plan still has not materialised.

“The government is not only losing a huge chunk of revenue due to the grey market with no system in the country to regulate it, the traders are also suffering,” said Agrawal.

“We have been putting pressure on the Nepal Telecommunications Authority to implement the provision, and it has said that it will be done within three months,” he said.

Min Prasad Aryal, director at the Nepal Telecommunications Authority, admitted that delays had occurred in launching the system. The authority had planned to introduce the system by creating separate infrastructure, and the project was held up while buying land to construct the building.

“Then Covid-19 came and put a stop to everything. But the building being built at Chabahil will soon be ready, and the first batch of equipment has also arrived—consisting of both hardware and software. International experts will also be coming soon to install the system,” he said. “We plan to start trials within three months.”

The infrastructure is being constructed by the authority while a Malaysian company will be installing the hardware and software which will track the illegal entry of mobile phones, he said.

Once the building is completed, the mobile connectivity of telecom operators like Nepal Telecom, Ncell and Smart Telecom will need to be connected in the system.

According to Aryal, as soon as the system comes into operation, the grey market will be totally shut down, chances of theft will be minimised, and criminal activities that are conducted through the use of mobile phones will be reduced.