Streaming not working when deployed to VPS

[nemo0]

I am using a custom Hono backend and using the AI SDK core to stream the response from backend to frontend. The backend sends the response like this:

      return result.toDataStreamResponse({
        headers: {
          "Transfer-Encoding": "chunked",
          Connection: "keep-alive",
        },
      });

The frontend handles the rendering logic. However, the messages are getting properly streamed on my localhost(with/without building the application) but when deployed, it's not working. I am deploying my application to a DigitalOcean server, and using Nginx.

My Nginx has this configuration:

API block

    location /be/chat {
        auth_basic off;
        proxy_buffering off;
        proxy_request_buffering off;
        chunked_transfer_encoding on;
        proxy_pass http://localhost:3001/;
        proxy_set_header Host $host;
        proxy_set_header X-Real-IP $remote_addr;
        proxy_set_header X-Forwarded-For $proxy_add_x_forwarded_for;
        proxy_set_header X-Forwarded-Proto $scheme;
    }

Frontend block

    location / {
        proxy_buffering off;
        proxy_request_buffering off;
        chunked_transfer_encoding on;

        # Set headers for the proxied request
        proxy_set_header Host $host;
        proxy_set_header X-Real-IP $remote_addr;
        proxy_set_header X-Forwarded-For $proxy_add_x_forwarded_for;
        proxy_set_header X-Forwarded-Proto $scheme;

        # Headers to prevent caching and ensure streaming
        proxy_set_header Cache-Control no-cache;
        proxy_set_header Connection '';
        proxy_http_version 1.1;

        # Pass the request to your Next.js application
        proxy_pass http://localhost:5001;
    }

I am not sure why is this happening. Can someone help me figure out the issue?