Ease of Doing Business for MSMEs: Deploying healthcare oxygen supplies, which has been barred for industrial use, in hospitals to treat Covid-19 patients following its increasing demand amid the second wave of the pandemic would influence modest and medium enterprises (SMEs). The ‘hiccup seems temporary for now’ will be faced by SMEs in metal fabrication, automotive elements, shipbreaking, paper, and engineering, according to rating agency Crisil. The demand for healthcare oxygen is most likely to have jumped 5-fold in the second week of April in comparison to pre-pandemic levels, it added. “The disruption in the supply of oxygen for industrial use would temporarily impact the revenues of small and mid-sized companies into metal fabrication, automotive components, shipbreaking, paper, and engineering. These (SMEs) typically do not have captive oxygen plants and source their requirement through merchant suppliers for operations such as welding, cutting, cleaning, and chemical processes,” mentioned Gautam Shahi, Director, CRISIL Ratings.
Moreover, setting up an air-separation plant or importing oxygen is not a viable selection as it demands important lead time and entails a comparatively prohibitive expense that leaves SMEs more vulnerable compared with bigger peers, the agency mentioned. Oxygen is consumed by business in two methods – onsite, and merchant sales. Onsite is via captive plants for course of action-driven industries (such as the nine sectors exempted by the government), which account for 75-80 per cent of oxygen manufactured in India. The balance 20-25 per cent is supplied via merchant sales (known as liquid oxygen) via cryogenic tanks and cylinders, Crisil mentioned. The healthcare sector consumes about 10 per cent of merchant sales, and other folks the rest.
“At this juncture, we believe that the disruption in oxygen supplies for industrial use will be for 6 to 8 weeks. Besides, affected sectors can partly manage their oxygen requirements with inventory. Therefore, we expect only a limited decline in revenue for them. Their credit profiles are expected to be stable,” mentioned Sushant Sarode, Associate Director, CRISIL Ratings. However, the ‘downside risk’ in impacted sectors, according to Crisil, will be exacerbated if the existing Covid wave extends for a longer than anticipated period curtailing oxygen provide to industries.
The influence will be larger for organizations in Maharashtra, New Delhi, Rajasthan, Madhya Pradesh, and Gujarat, exactly where healthcare oxygen demand has improved several occasions due to higher caseloads, Crisil added. Home Secretary Ajay Bhalla on Sunday had asked Chief Secretaries of states and union territories to prohibit oxygen provide meant for industrial use from April 22 except for nine specified industries. The nine industries integrated ampoules & vials, pharmaceutical, petroleum refineries, steel plants, nuclear power facilities, oxygen cylinder suppliers, wastewater therapy plants, meals & water purification, and course of action industries which call for the uninterrupted operation of furnaces, processes, and so on.