What is a industrial gases project report?
An industrial gases project report is a detailed project report (DPR) for a plant that separates oxygen and nitrogen from air and fills them into high-pressure cylinders or storage tanks. It sets out the separation route, machinery, PESO licences, market, project cost, means of finance, five-year projections, DSCR and break-even.
Promoters use it to choose a route and size the plant and to apply for a term loan; lenders use it to judge whether gas sales can repay the loan.
Also known as: industrial gas plant project report, oxygen and nitrogen gas plant DPR, air separation plant project report, industrial gases business plan, oxygen cylinder filling plant project report.
Industrial gases manufacturing plant cost in India
Our sample report models a small plant that separates gas from air and fills about 2,700 cubic metres a day into cylinders, roughly 385 standard 7 cubic metre cylinders. It runs 330 days a year, starts at 60% capacity, reaches 80% by Year 5 and sells gas at ₹21.90 per cubic metre.
| Land and site development | 10.33 |
|---|---|
| Building and civil works | 21.28 |
| Plant and machinery | 45.89 |
| Other fixed assets | 6.47 |
| Contingencies | 3.36 |
| Preliminary and pre-operative | 2.18 |
| Working capital margin | 4.28 |
| Total | 93.79 |
| Promoter's contribution (25%) | 23.45 |
|---|---|
| Term loan from bank (75%) | 70.34 |
| Cash credit limit (separate) | 12.84 |
| Total project cost | 93.79 |
Term loan at 10.5% with a 6-month moratorium and 54 monthly instalments. All figures are illustrative; a cryogenic plant making liquid product costs several times more.
Industrial gases manufacturing process
Air is about 78% nitrogen and 21% oxygen, with nearly 1% argon. A cryogenic plant cools air until it turns liquid, then separates it by boiling point. The six steps below are the ones modelled in our sample report.
- Filtration and compression
Air is drawn through a filter and compressed in stages, with intercoolers removing heat between stages.
- Purification
Molecular sieve beds remove moisture, carbon dioxide and hydrocarbons, which would otherwise freeze and block the cold section.
- Cooling and expansion
Clean air is cooled against the outgoing cold gas in a heat exchanger, then expanded so part of it liquefies.
- Distillation
In the column, nitrogen boils off at about minus 196 °C while oxygen gathers as liquid at about minus 183 °C.
- Cylinder filling
Liquid oxygen or nitrogen is pumped to high pressure, vaporised and filled into cylinders through a manifold.
- Testing and dispatch
Purity and moisture are checked for each batch, and cylinders are inspected, tagged and sent out.
Cryogenic, PSA or liquid filling: which route suits your plant?
The route decides purity, the gases you can sell and the project cost more than any other choice. Many small "oxygen plants" in Indian towns do not separate air at all; they buy liquid oxygen by tanker and fill cylinders.
| Route | What it makes | Best fit |
|---|---|---|
| Cryogenic air separation | High-purity oxygen and nitrogen, plus argon in larger plants; liquid or gas | Merchant plants selling cylinders and liquid; the highest capital cost and power load |
| Pressure swing adsorption (PSA) | Oxygen at about 93% through a molecular sieve, or nitrogen gas; no liquid, no argon | On-site supply to one user, and hospitals using Oxygen 93% |
| Vacuum PSA (VPSA) | Larger volumes of oxygen gas at PSA purity with lower power per unit | Glass, steel and paper plants that need gas on site, not cylinders |
| Liquid-to-cylinder filling | Cylinders filled from bought liquid oxygen or nitrogen held in a cryogenic tank | The lowest-cost start, but margins depend on the liquid supplier's price |
Industrial cutting and welding buyers usually expect cryogenic-grade purity, so check what your buyers specify before choosing PSA.
Machinery for an industrial gas plant
The separation unit is the largest item in our sample, at 55% of machinery cost. Cylinders count as plant because the business needs a pool of them in circulation with customers.
| Machine | What it does | Sample cost (₹ lakh) |
|---|---|---|
| Air separation unit | Purifies, cools and separates air into oxygen and nitrogen | 25.24 |
| Air compressor | Feeds the separation unit with compressed air | 6.88 |
| Cylinder filling manifold | Fills several cylinders at once at high pressure | 4.59 |
| Gas cylinders | The pool rotated between plant and customers | 6.88 |
| Testing equipment | Checks purity, moisture and cylinder condition | 2.30 |
| Total plant and machinery | 45.89 | |
Costs are the sample report's estimates for a small cylinder plant. A cryogenic cold box of the same output costs more; get current quotations before you finalise.
Power and running costs of an oxygen and nitrogen plant
Air is free, so electricity takes the place of raw material. The sample books the power used for separation under raw materials and the rest of the plant's power under power and fuel; together they come to about 30% of sales.
| Cost head (Year 3) | ₹ lakh | Share of sales |
|---|---|---|
| Power for air separation | 29.96 | 21.9% |
| Cylinder maintenance and valves | 12.84 | 9.4% |
| Other power and fuel | 10.61 | 7.8% |
| Wages and salaries (5 people) | 13.30 | 9.7% |
| Repairs and maintenance | 1.01 | 0.7% |
| Revenue from operations, Year 3 | 136.59 | 100% |
Values are from our illustrative sample at 70% capacity. Your report uses your state's industrial tariff, including demand charges.
Licences and approvals for an industrial gas plant
Most approvals for a gas plant come from PESO, and PESO approves the layout before you build. These are the product-specific items, as of October 2026.
| Cylinder filling | PESO licence in Form E under the Gas Cylinders Rules 2016; oxygen and nitrogen are non-toxic, non-flammable gases handled by the PESO circle office |
|---|---|
| Cylinder storage | PESO licence in Form F for the filled cylinder shed, attached to the filling premises or separate |
| Cryogenic liquid tank | PESO licence in Form LS-1A under the SMPV(U) Rules 2016, applied for through the National Single Window portal |
| Medical oxygen | Drug manufacturing licence from the State Drugs Controller before any sale to hospitals |
| Pollution board | The CPCB 2025 classification, as adopted by state boards, lists medical oxygen and compressed oxygen from crude liquid oxygen as White (no consent needed); confirm the category of an air separation plant with your state board |
| Product standard | IS 1747:2023 for compressed and liquid nitrogen |
| GST | Medical grade oxygen (HSN 2804 40 10) at 5%; industrial grades usually fall in the 18% residual entry for inorganic chemicals, so confirm the HSN with your CA |
Udyam, GST registration, factory licence, fire NOC and trade licence also apply. Rules change; confirm with PESO and your state departments before applying.
Who buys industrial gases from a regional plant?
Cylinder gas is a local trade. A filled cylinder is heavy for the gas it holds, so freight limits how far a small plant can sell, and buyers stay with a supplier who keeps them stocked. Large gas companies serve big steel and chemical plants by pipeline or tanker, which leaves cylinder users to regional plants.
- Fabrication, welding and gas-cutting workshops
- Steel, foundry and heat-treatment units
- Chemical and pharmaceutical plants needing nitrogen blanketing
- Hospitals and nursing homes, for licensed medical oxygen
- Gas dealers and cylinder distributors
- Food processing and packaging units
Where a new plant wins: buyers judge you on whether a full cylinder arrives when they ring. A plant with enough cylinders in rotation and a delivery vehicle keeps accounts that a cheaper but distant supplier loses.
Mistakes that weaken an industrial gases project report
- Too few cylinders in the pool
Customers hold cylinders for days or weeks. If the report buys only one day's worth, the plant cannot sell its capacity.
- A flat power rate
Power is the biggest running cost. Leaving out demand charges and the state's time-of-day tariff overstates profit and DSCR.
- Counting medical oxygen sales without a drug licence
Hospital sales need a separate licence, testing and records. A report that assumes them without these will not hold up.
- Building before PESO layout approval
PESO checks the as-built plant against the approved drawing. Changing the layout later costs time and money.
- Using 2021 shortage prices
Oxygen prices spiked during the second COVID wave. Projections based on them make revenue look far higher than normal trade.
How NPCS prepares your industrial gases project report
- Route and capacityCompare cryogenic, PSA and liquid filling for your gases, buyers and budget.
- Cylinder and power planSize the cylinder pool and model power at your state's tariff.
- Bank-ready project reportProjections, DSCR and working capital in the format your lender wants.
- Licences and layoutA plant layout and the PESO, drug and state approvals list for your site.
NPCS's client list includes 2 assignments for industrial gas projects and 269 across specialty chemicals, prepared for entrepreneurs, banks and companies since 1994.
What's inside the industrial gases sample report
- Introduction
- Uses and applications
- Market potential
- Manufacturing process
- Raw materials
- Plant and machinery
- Land, building and utilities
- Manpower
- Licences and approvals
- Project cost and means of finance
- Working capital
- Projected profitability
- Cash flow statement
- Projected balance sheet
- Depreciation
- Term loan repayment
- Debt service coverage
- Break-even analysis
- Financial ratios
- Key assumptions
- Conclusion
- Monthly loan repayment schedule
18 pages, five-year projections, illustrative figures.
Open sample reportFree sample or a report for your project?
| What you get | Free sample | NPCS report for your project |
|---|---|---|
| Capacity and location | Typical unit | Your capacity, site and state |
| Figures | Illustrative | Built on current prices and quotations |
| Machinery suppliers and quotations | No | Yes |
| Market survey for your region | No | Yes |
| Bank or scheme format (PMEGP, term loan) | No | Yes |
| Use for a loan application | No | Yes |
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Industrial Gases project report: frequently asked questions
How much does it cost to set up an industrial gas plant in India?
Our sample report models a small cylinder-filling plant of 2,700 cubic metres per day at ₹93.79 lakh, including land, building, machinery and working capital margin. A cryogenic plant that also makes liquid oxygen, nitrogen and argon for tanker supply costs many times more, often several crore. These ranges are indicative; your report prices the route and capacity you choose.
Which gases does an industrial gas plant produce?
An air separation plant produces oxygen and nitrogen, and larger cryogenic plants also recover argon. Oxygen goes mainly to cutting, welding, steel and hospitals; nitrogen to inert blanketing, chemicals, food packaging and electronics. Carbon dioxide, acetylene and hydrogen come from different processes and need separate plants, so a project report should name exactly which gases you will sell.
Which licences are needed for an oxygen or nitrogen filling plant?
Filling cylinders needs a PESO licence in Form E under the Gas Cylinders Rules 2016, and storing filled cylinders needs Form F. A cryogenic liquid tank needs a licence in Form LS-1A under the SMPV(U) Rules 2016. PESO first approves the layout and site plan, then grants and endorses the licence after inspection. Udyam, GST, factory, fire and pollution board approvals also apply.
Can an industrial oxygen plant sell medical oxygen?
Not on an industrial licence alone. Medical oxygen is a drug under the Drugs and Cosmetics Act. Selling it to hospitals needs a manufacturing licence from the State Drugs Controller, with testing and records to match. Medical grade oxygen also carries 5% GST, while industrial grades usually fall in the 18% schedule. Plan the licence and the lab before you build.
Is an industrial gases business profitable?
In our illustrative sample, a 2,700 cubic metres per day plant earns a 32% return on investment in Year 3. It breaks even at about 31% of capacity and pays back in about 2.8 years. Actual results depend most on the power tariff, how many cylinders you keep in circulation, how fast customers return them and the price you get from nearby buyers.
Industrial gas plant ka business kaise shuru kare?
Start by choosing the gases and the route: buying liquid oxygen for cylinder filling, a PSA plant, or a small cryogenic plant. Then fix a site with an industrial power connection, get PESO layout approval before construction and line up cylinder buyers. A project report with projections and DSCR helps you raise the term loan and shows the bank the plan.
Is the sample report free and can I use it for a loan?
The sample is free to view and download. It is an illustrative report that shows the format and depth of an NPCS report. Its figures are representative and not based on a real project, so do not submit it to a bank. For a loan, NPCS prepares a report for your own gases, capacity, location and lender.
Sources and references
- Standard operating procedure: licences under the Gas Cylinders Rules, 2016Petroleum and Explosives Safety Organisation (PESO), checked Oct 2026
- SOP for the Static and Mobile Pressure Vessels (Unfired) Rules, 2016 (2 Dec 2024)Petroleum and Explosives Safety Organisation (PESO), checked Oct 2026
- IS 1747:2023 Nitrogen, compressed gas and liquid: specificationBureau of Indian Standards, checked Oct 2026
- Notification No. 9/2025-Integrated Tax (Rate), 17 Sep 2025Central Board of Indirect Taxes and Customs, checked Oct 2026
- Publication of list of White category industries (27 Jun 2025)Pollution Control Board, Assam (adopting the CPCB 2025 classification), checked Oct 2026
- Draft G.S.R. 1368(E): Oxygen 93% by molecular sieve process, Schedule KMinistry of Health and Family Welfare (CDSCO), checked Oct 2026
The NPCS project team, led by Ajay Kumar Gupta
This page and its sample report are prepared and reviewed by the NPCS project team, which has written techno-economic feasibility studies and detailed project reports since 1994.
Ajay Kumar Gupta founded Niir Project Consultancy Services (NPCS) and leads the organisation. With 40 years of experience in MSME project consulting, he has built the team that has delivered more than 28,000 project reports for clients worldwide, helping entrepreneurs plan and finance profitable manufacturing businesses.
- Published
- Last updated
- Next review
- Oct 2027
- Reviewed by
- NPCS project team
This page is reviewed every 12 months, or sooner when scheme limits, GST rates, BIS rules or pollution categories change. The sample report is illustrative: its figures are generated from industry-typical ratios for a unit of this size, checked so every statement balances, and are not taken from any client project.