True cost of Gas you buy in cylinders
Disclaimer: This article is highlighting areas of concern which are unknown to many customers. It is only meant to be a handy tool for customer awareness and should be used for informational purposes only.
When purchasing a cylinder, the user or the purchaser at a minimum is aware of the following:
• Size of cylinder
• Quantity of gas they should receive in that cylinder
• Rate of cylinder they are paying per cylinder
With this knowledge the user has a clear understanding that the gas is costing them how much.
Let us work on a basic use case as under to highlight our case:
Size of cylinder – 47 liters (approx) water volume
Quantity of gas at 150 bar pressure – 7 Nm3
Rate of cylinder – Rs. 300/- per cylinder
With the above assumptions, the user can easily come to the conclusion that the gas is costing them: Rs. 42.85 per Nm3 of gas.
Now let’s look at how this cost in many cases may actually be higher than Rs. 42.85.
- Case 1 – Unused gas is returned back in the cylinder
User is maintaining a pressure of 7 bar in their gas line. In this case, once the cylinder reaches 7 bar, the pressure in the cylinder and the line equalises and gas can no longer be extracted from the cylinder. As a result, 47 litres x 7 bar = 0.329 Nm3 gas is returned back in the cylinder – unused. Hence, the user only uses (7-0.329 = 6.671 Nm3) gas in the cylinder. Since the user has paid Rs. 300 for the cylinder, the actual cost of gas comes to – Rs. 300 / 6.671 Nm3 = Rs. 44.90 per Nm3.
- Case 2 – Freight charges are usually charged above the cylinder cost
The user purchases 25 cylinders at one-go and the merchant charges Rs. 2500 for delivering the cylinders towards freight charges. Hence, the user pays:
Rs. 300 x 25 cylinders + Rs. 2500 = Rs. 10,000. Hence, the actual cost per cylinder comes to Rs. 400 per cylinder.
Couple this with actual gas used as 6.671 Nm3, the actual gas per Nm3 comes to = Rs. 400 / 6.671 = Rs. 59.96 = say Rs. 60 / Nm3
- Case 3 – Taxes are charged extra
Several taxes such as excise duty, sales tax, VAT etc. will get loaded onto the total invoice value. Hence, Rs. 10,000 with 5% ST or VAT shall come to Rs. 10,500 = Rs. 420 per cylinder.
Couple this with actual gas used as 6.671 Nm3, the actual gas per Nm3 comes to = Rs. 420 / 6.671 = Rs. 62.95 = say Rs. 63 / Nm3
As you can see from the above, when the user is thinking that they are paying Rs. 42.85 per Nm3, they are actually paying Rs. 63 per Nm3, a whopping Rs. 20.15 increase (almost 50% higher than what the user thought they were paying).
In any organisation, there are associated overheads and we are ignoring those in interest of keeping the discussion simple. We haven’t taken into consideration the administrative costs associated with cylinder procurement and cylinder loading/unloading and connecting/disconnecting labor costs. If one to factor those in, the cost per Nm3 of gas in a cylinder would be even higher.
Installing your own gas generator makes a lot of sense when one understands the actual cost of gas paid in cylinders. Most of our customers recover their investment cost of buying the gas generator, in as little as 1 year only.
MVS Engineering is a turnkey supplier of Gas generation equipment for Nitrogen, Oxygen and Hydrogen gases. We also manufacture Air, Gas, Liquid Dryers and Gas Purification systems. MVS is the largest supplier of gaseous Nitrogen, Oxygen and Hydrogen plants in India. Besides India, MVS also regularly exports it’s equipment to the Middle East, Africa, South East Asia and Europe.
MVS was founded in 1977 and for last 39+ years has supplied over 8000 skid-mounted units worldwide.
Read more about the company in the About Us section of our website.