How to Start an Industrial Gas Plant Business in India
Contents 9 sections
- Which route suits you: cylinder refilling, a PSA plant or a cryogenic plant?
- How are oxygen, nitrogen and argon made, step by step?
- Which machines does an industrial gas plant need?
- Which licences does a gas filling plant need, and in what order?
- How much does an industrial gas plant cost, and what returns do project reports assume?
- Who buys from a new gas plant, and which trends should shape your plan?
- Where do new gas plants go wrong?
- Frequently asked questions
- What should you do before buying any machinery?
An industrial gas plant in India comes down to one early choice: make oxygen and nitrogen from air yourself, or fill cylinders with gas bought from someone else. The usual first plant makes both from air, fills cylinders and sells to steel, welding, pharma and hospital buyers close enough for quick delivery. Plants of the sizes in the project reports below cost about ₹4.7 crore to ₹7.5 crore, and electricity is the main running cost. Linde and INOX Air Products already hold about half of India's commercial gas sales, so a new plant wins on delivery time and local contracts, not on price. Line up two or three regular buyers before you order a compressor, and choose the gas they actually use.
Which route suits you: cylinder refilling, a PSA plant or a cryogenic plant?
| Route | How it gets the gas | Gases you can sell | Catch |
|---|---|---|---|
| Cylinder refilling unit | Buys gas in bulk and fills cylinders | Whatever you buy | Margin and supply depend on one supplier |
| Pressure swing adsorption (PSA) plant | Passes compressed air through zeolite near room temperature, which holds back one gas | Oxygen or nitrogen as gas | No argon, no liquid product |
| Cryogenic plant | Cools air until it liquefies, then separates it by boiling point | Oxygen, nitrogen and argon, as gas or liquid | Highest capital cost, periodic defrost shutdowns |
Start with oxygen and nitrogen. Oxygen is the largest product, about 31% of India's commercial gas revenue in 2024 in the same gasworld report, and one air plant gives you both.
Let your biggest buyer pick the route. A fabricator or hospital supplier needs oxygen, and PSA is enough. A food, pharma or electronics maker needs nitrogen, also within PSA reach. A stainless steel or welding customer wants argon, which is drawn off from cryogenic columns, so that customer pushes you towards the bigger plant.
How are oxygen, nitrogen and argon made, step by step?
A cryogenic plant separates the gases by boiling point:
- Filter the air to remove dust.
- Compress it, typically to 5 to 10 bar gauge, cooling between stages so water drops out.
- Pass it through molecular sieve beds that remove water, carbon dioxide and hydrocarbons, which would freeze and block the cold equipment.
- Cool it in a heat exchanger, with turbo-expanders supplying refrigeration, until part of it liquefies.
- Distil it in columns. Nitrogen boils at minus 196°C, argon at minus 186°C and oxygen at minus 183°C.
- Warm the products back up, or hold them as liquid in tanks.
- Compress gas into cylinders through a filling manifold, then test and record each batch.
A PSA plant skips steps 3 to 5: zeolite beds adsorb one gas from the compressed air, so no liquid forms.
Which machines does an industrial gas plant need?
| Machine | What it does | Route |
|---|---|---|
| Air filter and compressor | Removes dust and raises air pressure | All |
| Molecular sieve purifier | Strips water, CO2 and hydrocarbons | Cryogenic |
| Heat exchanger, turbo-expanders and distillation columns | Cool the air to liquid and separate nitrogen, argon and oxygen | Cryogenic |
| Zeolite adsorption vessels | Separate oxygen or nitrogen without liquefying air | PSA |
| High-pressure compressor and filling manifold | Charge cylinders | All |
| Purity analysers, valves and pipelines | Check each batch and carry the gas | All |
Which licences does a gas filling plant need, and in what order?
The licence that matters most is the filling licence from the Petroleum and Explosives Safety Organisation (PESO), under the Gas Cylinders Rules, 2016. PESO's step-by-step procedure is applied through the NSWS online portal.
| Order | Approval | What to know |
|---|---|---|
| 1 | Prior approval of premises (PESO) | Apply before you build, with proof of land possession, a layout plan, a process description and a piping drawing |
| 2 | Filling licence, Form E (PESO circle office) | Needs ownership proof and an as-built drawing matching the approved plan. Flammable or toxic gases also need pollution board, fire and local body clearances |
| 3 | Inspection and endorsement | The licence starts on endorsement and runs to 30 September, for up to ten years |
| 4 | Medical oxygen (state drug authorities) | Medical oxygen is a drug under the Drugs and Cosmetics Act, 1940, so hospital supply needs a drug manufacturing licence on top of PESO |
How much does an industrial gas plant cost, and what returns do project reports assume?
Two project reports from Niir Project Consultancy Services (NPCS) show how output moves the investment. One covers industrial gases, the other oxygen for industrial and pharmaceutical use.
| Item | Industrial gases report | Oxygen report |
|---|---|---|
| Daily output | 350 oxygen and 100 nitrogen cylinders (7 cubic metres each) | 500 medical grade (99.5-99.9% purity) and 500 industrial grade (95-99%) oxygen cylinders |
| Plant and machinery | ₹147 lakh | ₹418 lakh |
| Cost of project | ₹466 lakh | ₹748 lakh |
| Rate of return | 27% | 58% |
| Break-even point | 57% | 27% |
Read these as a range, not a forecast. Machinery is about a third of project cost in the first report and over half in the second, and the profile pages hide the split of the rest, along with land, power and manpower. Returns differ because assumptions differ, so ask for them before quoting either. Break-even is the share of capacity the plant must sell to cover its costs.
Check power on your own tariff. Sanghi Overseas, an Indian plant maker, quotes about 1 kWh per cubic metre of oxygen for larger cryogenic plants, so a 7 cubic metre cylinder carries about 7 units of electricity before filling, and each ₹1 on the tariff adds about ₹7.
NPCS has prepared project reports since 1994, under an ISO 9001:2015 certified research process.
Who buys from a new gas plant, and which trends should shape your plan?
India's commercial gas market was worth just over $1.82 billion in 2024, with metals taking 39%, says the gasworld report. Packaged gas, where a cylinder filler sits, brought in about $590 million.
| Trend | What it means for a new plant |
|---|---|
| Large merchant plants | Malaysia's Kelington Group plans a 300 tonne per day merchant plant near Mumbai and Pune for the third quarter of 2028, subject to approvals. In that belt, compete on small orders and delivery speed |
| Electronic-grade gases | INOX Air Products announced a Dholera gas hub in October 2025, within a ₹500 crore outlay. This is a large producer's market, not a first plant |
| Green hydrogen | India's National Green Hydrogen Mission targets 5 million tonnes a year by 2030. Hydrogen is an electrolyser business, separate from an air plant |
Where do new gas plants go wrong?
- Buying the plant before the buyers. The reports above need 27% to 57% of capacity just to break even.
- Treating cylinders as an afterthought. Cylinders sitting with customers are idle stock, so budget the fleet apart from the plant.
Frequently asked questions
Do I need a licence to fill oxygen or nitrogen cylinders?
Yes. Filling needs a PESO licence in Form E, applied for online after prior approval of your premises. It sits alongside your factory licence and pollution consent, not in place of them. Medical oxygen needs a drug licence as well.
Can an industrial oxygen plant also supply medical oxygen?
Only with a drug manufacturing licence, because medical oxygen is a drug under the Drugs and Cosmetics Act, 1940. Confirm the issuing authority and plant conditions with your state drugs control department before you promise hospital supply. Industrial grade oxygen alone does not qualify.
How much space does a gas plant need?
Sanghi Overseas lists about 12 by 12 metres for a 100 cubic metre per hour cryogenic plant and 35 by 15 metres for 300 cubic metres per hour, before cylinder storage and a filling bay. PESO's prior approval also asks for a layout plan showing the area within 100 metres.
Can I start with hydrogen, acetylene or CO2?
Not as a first plant, since none of them comes from an air plant and flammable gases face extra PESO scrutiny. Hydrogen peroxide is a liquid chemical, not a gas; see the hydrogen peroxide manufacturing guide.
What should you do before buying any machinery?
- List the buyers within delivery range, the gas each uses and the monthly volume, then get written intent from two or three.
- Pick the route from the table above, using the gas your biggest buyer needs.
- Ask plant makers for power use per cubic metre, purity guarantee, defrost interval and layout drawing.
- Secure land with clear ownership and file the PESO prior approval before you build.
- Test the numbers on your tariff, using the feasibility study guide and the detailed project report guide.
An NPCS project report for an oxygen and nitrogen plant sets out machinery with suppliers, power and manpower, cost of production, break-even and a five to ten year cash flow, in the format banks typically ask for. NPCS also publishes The Complete Book on Industrial Gases by P. K. Chattopadhyay. The how-to-start hub lists the other manufacturing guides.
Planning a new manufacturing unit?
NIIR prepares detailed project reports and feasibility studies for new projects. Share your requirement and the team will get in touch.
