What is a oxygen project report?
An oxygen project report is a detailed project report (DPR) for a plant that separates oxygen from air, by cryogenic distillation or pressure swing adsorption, and fills it into cylinders or tanks. It sets out the technology, machinery, power load, PESO licences, market, project cost, five-year projections, DSCR and break-even a lender needs.
Entrepreneurs, gas dealers and hospital groups use it to choose a plant size and raise a term loan; banks use it to judge whether cylinder sales can repay the debt.
Also known as: oxygen plant project report, project report on oxygen gas plant, oxygen plant business plan, DPR for an oxygen gas plant, PSA oxygen plant project report.
Oxygen manufacturing plant cost in India
Our sample report models a cryogenic plant making 4,100 cubic metres of oxygen a day and filling it into cylinders. It runs 330 days a year, starts at 60% of capacity and reaches 80% in Year 5, selling at ₹29.90 per cubic metre before GST.
At about 7 cubic metres to a jumbo cylinder, full output means filling close to 600 cylinders a day. That is why the cylinder pool sits inside plant and machinery, not in working capital.
| Land and site development | 21.74 |
|---|---|
| Building and civil works | 48.95 |
| Plant and machinery | 91.16 |
| Other fixed assets | 11.91 |
| Contingencies | 7.01 |
| Preliminary and pre-operative | 4.52 |
| Working capital margin | 8.96 |
| Total | 194.25 |
| Promoter's contribution (25%) | 48.56 |
|---|---|
| Term loan from bank (75%) | 145.69 |
| Cash credit limit (separate) | 26.86 |
| Total project cost | 194.25 |
Term loan at 10.5% with a 6-month moratorium and 54 monthly instalments. Minimum DSCR is 1.93. All figures are illustrative.
Oxygen manufacturing process in a cryogenic plant
Air is about 21% oxygen and 78% nitrogen. A cryogenic plant cools air until it turns liquid, then separates the two by boiling point. Nitrogen boils at about minus 196 °C and oxygen at about minus 183 °C.
- Air intake and filtration
Air is drawn in through dust filters placed away from exhausts, since oil vapour or smoke in the intake ends up in the cold box.
- Compression and cooling
A multi-stage compressor raises the pressure and an after-cooler, fed from the cooling tower, removes the heat.
- Purification
Twin molecular sieve beds take out moisture, carbon dioxide and hydrocarbons, which would freeze or build up in the column.
- Cryogenic cooling
Heat exchangers and an expansion engine chill the air to about minus 180 °C until most of it liquefies.
- Distillation
In the column, nitrogen rises as vapour and liquid oxygen collects in the bottom sump.
- Pumping and vaporising
A liquid oxygen pump raises the pressure and a vaporiser turns the liquid into gas for filling.
- Cylinder filling
Cylinders are inspected, evacuated and filled on a manifold to about 150 bar.
- Testing and dispatch
Purity is checked for each batch and every cylinder is leak-tested before it leaves.
PSA or cryogenic: which oxygen plant should you set up?
The two routes serve different buyers. Decide the purity your market needs first, because it fixes the technology, the capital cost and the licences.
| Point | PSA plant | Cryogenic plant |
|---|---|---|
| How it works | Zeolite beds hold back nitrogen from compressed air in alternate cycles | Air is liquefied and distilled in a cold box |
| Purity | About 93% oxygen | 99.5% or higher |
| Output | Gas only | Gas and liquid oxygen, which can be stored |
| Start-up | Minutes | Several hours for the cold box to cool down |
| Typical buyers | Hospitals with on-site plants, small refilling units | Welding and cutting, steel and foundries, medical cylinders, liquid buyers |
Why the sample uses cryogenic: fabrication shops and steel buyers want high-purity oxygen for clean cuts, and a cryogenic plant can sell to them and, with a licence, to hospitals.
Raw materials for an oxygen plant: power is the real input
Air costs nothing, so electricity for the air compressor and cold box does the work of a raw material. In our sample it is 78% of the input cost, with power for the rest of the plant shown separately as ₹22.44 lakh in Year 3.
| Input | Share of cost | Year 3 (₹ lakh) |
|---|---|---|
| Electricity for air compression and separation | 78% | 79.01 |
| Cylinder valves, seals and caps | 8% | 8.11 |
| Compressor lubricants and cooling water chemicals | 8% | 8.10 |
| Molecular sieve and activated alumina | 6% | 6.08 |
| Total | 100% | 101.30 |
For comparison, a 2024 study of hospital PSA plants in India lists a 37 kW compressor for a 500 litres per minute plant. Cylinder filling adds a 12.5 kW booster.
Machinery for an oxygen gas plant
The cold box with its column is the largest single item. The cylinder pool comes second, ahead of the air compressor, because the plant cannot sell gas it has no cylinders to fill.
| Machine | What it does | Sample cost (₹ lakh) |
|---|---|---|
| Cryogenic air separation unit with cold box | Liquefies and distils the air | 34.64 |
| Multi-stage air compressor with after-cooler | Compresses and cools the feed air | 12.76 |
| Molecular sieve air purification unit | Removes moisture and carbon dioxide | 6.38 |
| Liquid oxygen pump and vaporiser | Raises pressure and turns liquid to gas | 5.47 |
| Cylinder filling manifold | Fills a bank of cylinders at once | 4.56 |
| Steel oxygen cylinder pool | The pool that goes out to customers | 20.05 |
| Cooling tower and water pumps | Cools the compressor and after-cooler | 3.65 |
| Purity analyser and cylinder test equipment | Checks purity and cylinder condition | 3.65 |
| Total plant and machinery | 91.16 | |
Costs are the sample report's estimates. Air separation units are priced by output and purity, so get current quotations for your size.
Power, water and staff for an oxygen plant
An air separation plant runs round the clock. Stopping it means the cold box warms up and takes hours to come back to purity, so utilities are planned for continuous duty.
| Power | Industrial connection sized for the air compressor, the largest load; ask the discom about a dedicated feeder to limit trips |
|---|---|
| Power backup | A DG set keeps controls, lighting and the filling area running; it is not sized to run the main compressor |
| Cooling water | Cooling tower with make-up water for the compressor and after-cooler; water treatment chemicals limit scaling |
| Staff in the sample | 9 people, at ₹19.38 lakh in Year 1, working in shifts |
| Key skills | A plant operator trained on air separation, and staff trained in safe cylinder handling and filling |
Licences and approvals for an oxygen plant
Most approvals come from PESO, because oxygen is a compressed gas stored and moved in pressure vessels. Requirements below were checked in October 2026.
| Cylinder filling and storage | PESO licence in Form E to fill and Form F to store gas cylinders, under the Gas Cylinders Rules, 2016; granted by the PESO circle office for non-toxic, non-flammable gases |
|---|---|
| Liquid oxygen tank | Licence to store compressed gas in a pressure vessel (Form LS-1A or LS-1B) under the SMPV (Unfired) Rules, 2016 |
| Cylinder testing | Periodic testing of cylinders at a PESO-approved testing station |
| Product standard | IS 309:2023, Oxygen, compressed gas and liquid (fifth revision), from the Bureau of Indian Standards |
| Medical oxygen | Drug manufacturing licence under the Drugs and Cosmetics Act, 1940 and Rules, 1945, before any sale for medical use |
| Pollution board | CPCB's 2016 categorisation lists medical oxygen and compressed oxygen from crude liquid oxygen in the White category; confirm the category for a full plant with your State Pollution Control Board |
| Basic registrations | Udyam, GST, factory licence and fire NOC, as your state requires |
Who buys oxygen cylinders from a small plant?
Oxygen is sold close to the plant. A filled jumbo cylinder is heavy for the gas it carries, so a small plant serves its own district and nearby towns. It competes on reliable supply more than on price.
Most volume goes to gas cutting in fabrication and scrap yards. Hospitals pay more per cylinder but need a licensed supplier and steady deliveries, including at night.
- Fabrication, welding and gas cutting shops
- Hospitals and nursing homes
- Foundries and steel re-rolling mills
- Glass and engineering units
- Industrial gas dealers and distributors
The cylinder is the customer link: buyers stay with the plant whose cylinders they hold. A larger, well-tracked pool wins more business than a lower price.
Mistakes that weaken an oxygen project report
- Taking hospital delivered prices as plant revenue
Delivered refill prices include transport and dealer margin. Revenue should use the ex-plant price per cubic metre, or DSCR comes out too high.
- Too few cylinders
Cylinders sit with customers for days. A pool sized only to one day's filling leaves the plant idle while it waits for empties.
- Using the wrong power tariff or ignoring trips
Power is the biggest running cost, and each outage warms the cold box. Use your discom's industrial tariff and allow for restart losses.
- Counting medical sales without a drug licence
Hospital sales need a drug manufacturing licence first. Until it is granted, project only industrial sales.
- Leaving out cylinder testing and valves
Periodic testing, valve changes and lost cylinders are regular costs that a lender expects to see.
How NPCS helps you set up an oxygen plant
- Technology and sizeChoose PSA or cryogenic, purity and daily output to match your buyers.
- Plant and cylinder poolCompare air separation suppliers and size the cylinder pool to your sales.
- Bank-ready project reportPower cost, projections, DSCR and working capital in the format your lender wants.
- Licences and layoutPESO filing, drug licence route for medical oxygen, and a safe plant layout.
NPCS's client list includes 6 assignments for oxygen plants and 269 in specialty chemicals, prepared for entrepreneurs, banks and companies since 1994.
What's inside the oxygen 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
19 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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Oxygen project report: frequently asked questions
What is the cost of an oxygen plant project in India?
Our illustrative sample models a 4,100 cubic metres per day cryogenic plant with cylinder filling. Its total project cost is ₹194.25 lakh, of which plant and machinery is ₹91.16 lakh. Actual cost moves with technology, purity, the size of the cylinder pool, land and power connection charges, so get current machinery quotations before you fix the budget.
Which is better for a cylinder business, a PSA or a cryogenic oxygen plant?
A cryogenic plant gives 99.5% or purer oxygen and can also make liquid, which welding, cutting and steel buyers expect. A PSA plant gives about 93% oxygen gas, costs less and starts in minutes, and suits on-site hospital supply. Pick the route by what your buyers need, then size the plant around your cylinder sales.
Is an oxygen plant business profitable?
In our illustrative sample, the plant earns a 29.6% return on investment in Year 3, breaks even at 30.8% of capacity and pays back in about 2.9 years. Real profit depends mostly on the power tariff, how fully the plant runs, the cylinder pool you own and the price your district pays per cylinder.
What licences are needed to start an oxygen plant?
Filling and storing oxygen cylinders needs PESO licences under the Gas Cylinders Rules, 2016, and a liquid oxygen tank needs a licence under the SMPV (Unfired) Rules, 2016. Medical oxygen also needs a drug manufacturing licence. Add Udyam, GST, factory and fire approvals, and check the pollution board category in your state.
Can an industrial oxygen plant sell oxygen to hospitals?
Only with a drug manufacturing licence, because medical oxygen is regulated as a drug under the Drugs and Cosmetics Act, 1940. A licensed plant must test each batch, keep records and use cylinders kept for medical gas. Many small plants start with industrial buyers and add the medical licence once their testing and records are in place.
Oxygen plant ka business kaise shuru kare?
Start by finding the buyers in your district: fabrication shops, foundries, hospitals and gas dealers, and how many cylinders they use each day. Then choose PSA or cryogenic, apply for an industrial power connection and PESO licences, and get a project report with DSCR for the term loan. Plan your own cylinder pool from day one.
Is the sample oxygen project report PDF 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 it should not be submitted to a bank. For a loan, NPCS prepares a report for your own capacity, technology and location.
Sources and references
- Standard operating procedure for licences under the Gas Cylinders Rules, 2016Petroleum and Explosives Safety Organisation (PESO), checked Oct 2026
- FAQ on the Gas Cylinders RulesPetroleum and Explosives Safety Organisation (PESO), checked Oct 2026
- FAQ on the Static and Mobile Pressure Vessels (Unfired) RulesPetroleum and Explosives Safety Organisation (PESO), checked Oct 2026
- IS 309:2023 Oxygen, compressed gas and liquid: specificationBureau of Indian Standards, checked Oct 2026
- Revised categorisation of industries (Red, Orange, Green, White), Kerala State Pollution Control Board circular implementing CPCB directions of March 2016Kerala State Industrial Development Corporation, checked Oct 2026
- Cost analysis of different medical oxygen sources for a healthcare facility in India (Indian Journal of Anaesthesia, 2024)PubMed Central, US National Library of Medicine, 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.