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The move to divert oxygen supplies from industry to hospitals across the country could impact the operations of hundreds of small and mid-sized companies, company executives warned.

Over half a dozen companies, including Tata Steel Ltd, Reliance Industries Ltd, JSW Steel Ltd and SAIL Ltd, are pumping thousands of tonnes of medical-grade oxygen as India grapples with the worst surge in coronavirus infections.

But with demand for medical oxygen soaring, the disruption in the supply for industrial use could hit the operations of small- and mid-sized companies engaged in metal fabrication, automotive components, shipbreaking, paper and engineering, analysts said.

Demand for medical oxygen rocketed fivefold in the second week of April. Liquid medical oxygen or LMO is a crucial medical requirement for the treatment of covid patients.

The government on 18 April restricted the supply of oxygen for industrial purposes. It, however, exempted some industries such as makers of ampules and vials and oxygen cylinders, pharmaceuticals, petroleum refineries, steel plants, nuclear energy facilities, wastewater treatment plants, food and water purification, and process industries that require uninterrupted operation of furnaces. “These small- and mid-sized firms typically do not have captive oxygen plants and source their requirement through merchant suppliers for operations such as welding, cutting, cleaning and chemical processes," said Gautam Shahi, director, Crisil Ratings.

Setting up an air-separation plant or importing oxygen is costly and time-consuming, an unviable proposition for these companies, leaving them vulnerable.

On Tuesday, Reliance Industries upped its earlier commitment of supplying 100 tonnes of medical grade oxygen a day, saying it is tweaking manufacturing at its Jamnagar oil refineries to produce over 700 tonnes a day of medical-grade oxygen. It plans to raise the capacity to 1,000 tonnes.

While Tata Steel is supplying around 300 tonnes of oxygen per day, the Tata group on Tuesday announced it would import 24 cryogenic containers to transport liquid oxygen.

State-owned Indian Oil Corp. Ltd (150 tonnes) and Bharat Petroleum Corp. Ltd (100 tonnes a day), too, have started diverting oxygen produced at their refineries. JSW Group is supplying 610 tonnes of medical oxygen every day.

Oxygen is consumed by industry in two ways—onsite and merchant sales. Onsite is through captive plants for process-driven industries, which account for 75-80% of oxygen manufactured in India.

The rest is supplied through merchant sales (called liquid oxygen) through cryogenic tanks and cylinders. The healthcare sector consumes 10% of merchant sales. “This disruption in oxygen supplies for industrial use will be around for another six-seven weeks and could impact manufacturing activity. It, however, would not be as severe as last April," said Madan Sabnavis, economist, chief economist, Care Ratings.

Dasharath Panchal, who owns Swastik Industrial Fabricators in Andheri, Mumbai, and needs oxygen for thermal cutting, said he has stopped taking new orders. “For work, where we need other industrial gases like nitrogen, etc.; those orders we are accepting," said Panchal.

The Centre restricted the supply of oxygen for industrial purposes on 18 April. bloomberg
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The Centre restricted the supply of oxygen for industrial purposes on 18 April. bloomberg
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