Nepal's sole importer of liquid oxygen, Shankar Oxygen Gas, plans to turn manufacturer, and is preparing to set up a plant in Bhairahawa to produce the life-giving gas.

Managing Director Shankar Lal Agrawal told the Post that the foundation stone of the factory would be laid on Sunday. The proposed liquid oxygen plant will be the first in the country.

The company imports liquid oxygen from India, and currently supplies it to half a dozen hospitals, including Shukraraj Tropical and Infectious Disease Hospital and National Trauma Centre.

The hospitals were forced to resort to bottled oxygen for several days last month after Indian authorities ordered a halt to exports due to an oxygen crisis in India at the height of the second wave of Covid-19.

“We will no longer need to import liquid oxygen from India after we set up the plant,” said Agrawal. “I plan to invest around Rs1 billion to build the factory.”

Hospitals having the facilities to use liquid oxygen say it is much easier than using oxygen in cylinders as the gas can be piped into the patients' rooms directly from the tanks.

According to Agrawal, the proposed oxygen plant will have a capacity to produce 60 tonnes (around 7,000 cylinders) per day. “I hope to complete the construction within a year,” he said.

Besides supplying liquid oxygen, Shankar Oxygen has been distributing bottled oxygen to hospitals from its plants in Kathmandu and Bhairahawa.

Several other oxygen manufacturers doubt the plan to set up a factory will be viable because of the high cost involved and the largely saturated market in normal times.

“Though having a liquid oxygen plant in the country is better than importing it from India, I don’t see the feasibility of a liquid oxygen plant in Nepal due to the high investment and already saturated domestic oxygen market in normal times,” said Gaurav Sharda, president of the Oxygen Industry Association of Nepal, a grouping of Kathmandu-based oxygen plants.

According to the Oxygen Industry Association, the eight Kathmandu-based oxygen plants were turning out around 5,000 cylinders daily in pre-second wave times despite having a combined capacity of 8,000 cylinders daily.

About 70 percent of their output used to go to hospitals and the rest to industries and households, according to the association.

“The pandemic will not last forever, and demand for oxygen will drop sharply after the situation normalises,” said Sharda, who is also director of Kantipur Oxygen.

“Demand from private oxygen factories may go down as many hospitals have set up their own plants, and oxygen concentrators have also been distributed to different hospitals.”

According to Sharda, a minimum duty on oxygen imports from India may also emerge as another challenge for domestic factories if protectionist measures are not applied.

Shankar Oxygen realises the twin challenges of limited domestic market and potential influx of oxygen from India. “I have been asking the government for facilities like electricity at subsidised rates and a waiver of demand charges for electricity for a certain number of years,” said Agrawal.

He feels that the market for liquid oxygen may increase if more hospitals set up tanks for liquid oxygen. “Only two hospitals—Shukraraj and Trauma Centre—used to procure liquid oxygen. Now we are supplying liquid oxygen to six hospitals,” said Agrawal. “I have been arranging oxygen tanks for several other hospitals after entering into agreement with them. Our target is to set up such tanks in 40 hospitals in the next one year to ensure a market for our plant.”

The budget for the next fiscal year 2021-22 has announced a waiver of customs duty and value added tax on equipment imported to establish new oxygen plants, and Shankar Oxygen can benefit from this facility.

At the same time, the government has promised a 50 percent cash subsidy to community and private hospitals to establish new oxygen plants. The budget also states that arrangements will be made for all hospitals having more than 100 beds to set up their own oxygen plants. Currently, the majority of hospitals rely on private oxygen plants.

Oxygen manufacturers see this as a threat to their business. “Now our industry is running at full capacity because of the pandemic. When the situation normalises, the market will contract,” said Narayan Timilsina, chairperson of Sagarmatha Oxygen.

He also feels it will be difficult for liquid oxygen plants to survive given the limited domestic market. “A liquid oxygen plant may get enough market in Nepal only if the existing oxygen plants fail,” said Timilsina.

Oxygen manufacturers are concerned that the facilities that may potentially be provided to Shankar's liquid oxygen plant will hurt the market of other oxygen plants.

“The government should ensure that there remains a competitive market in oxygen supply. It should ensure that no company has a monopoly over the market,” said Sharda.