Adani fights pipeline tax in Supreme Court

Vol 17, PW 14 (27 Feb 14) Midstream & Downstream

In a Supreme Court case with ramifications for gas retailers across the country, Adani Gas has challenged the Ahmedabad Municipal Corporation's (AMC) move to impose property tax on its gas pipelines.

AMC wants Adani to pay more than Rs14cr ($2.25m) in outstanding property tax since 2005 when Adani began laying pipelines to supply gas to homes, businesses and factories in Ahmedabad. “We submitted a petition to the Supreme Court in the second week of February,” confirms Adani.

If the court rules for the Ahmedabad municipal authorities, it could open a Pandora’s Box of tax demands from civic bodies across the country. Adani approached the apex court after a two-judge bench of the Gujarat High Court delivered a split judgment in December.

“One judge said we have to pay," says Adani, "the other said we should not.” Property tax is based on the width of the road used to lay a pipeline with rates ranging from Rs40/metre/year ($0.64) to Rs70/metre/year ($1.12).

Adani's legal team believes the tax is unconstitutional. “It is the Gujarat government which must decide the lower and upper limits of the tax,” explains Adani.

“Only then can AMC levy a tax.” Adani supplies over 1m cm/d of CNG to cars and piped gas to households, businesses and factories in Ahmedabad and parts of Vadodara in Gujarat, Faridabad in Haryana and Khurja in Uttar Pradesh.