Crisil, Automotive News, ET Auto
Mumbai: As demand for medical oxygen skyrocketed, the Center banned industrial use (except for nine sectors) from April 22. The demand for medical oxygen is estimated to have increased five-fold in the second week of April from pre-pandemic levels as Covid -19 infections took off, Crisil said on Wednesday.
The resulting higher supply of medical oxygen will save lives, but will affect certain sectors, the rating agency said.
Crisil Ratings Director Gautam Shahi said: “The disruption in the supply of oxygen for industrial use would have a temporary impact on the revenues of small and medium-sized businesses in metal fabrication, automotive components, shipbreaking. , paper and engineering. oxygen plants and source from merchant suppliers for operations such as welding, cutting, cleaning and chemical processes. “
Setting up an air separation plant or importing oxygen requires a long lead time and relatively prohibitive cost, so it is not a viable option. This makes them more vulnerable than their taller peers.
The disruption of the supply of oxygen for industrial use would have a temporary impact on the incomes of small and medium-sized businesses in metal fabrication, automotive components, shipbreaking, paper and engineering. These generally do not have captive oxygen plants and source their needs from merchant suppliers for operations such as welding, cutting, cleaning and chemical processes.Gautam Shahi, Crisil Odds Director
Oxygen is consumed by industry in two ways: on-site sales and traders. Captive factories are located locally for process-oriented industries (including the nine government-exempt sectors), which account for 75 to 80 percent of the oxygen produced in India. The remaining 20-25% is provided through merchant sales (called liquid oxygen) through tanks and cryogenic cylinders. The health sector consumes 10 percent of merchant sales, and others the rest.
Crisil Ratings Associate Director Sushant Sarode said: “At this point, we expect the disruption to industrial oxygen supplies will last for 6 to 8 weeks. In addition, the sectors concerned can partly manage their oxygen needs with stocks. Therefore, we only expect a limited drop in their income for them. Their credit profiles are expected to be stable. “
However, a prolonged and intense second wave that reduces the oxygen supply to industries for a longer period than expected will increase downside risk in affected sectors, Crisil said.
The impact will be greater for businesses in Maharashtra, New Delhi, Rajasthan, Madhya Pradesh and Gujarat, where demand for medical oxygen has increased several times due to the high number of Covid-19 cases.