Nitrogen gas is used for packing the packets of chips  because it is an inert gas, and it prevents the oxidation of oils present in the chips. This keeps the chips fresh and has no or less breakage.
Nitrogen is often filled in chips packets to prevent rancidity as it is not too reactive with either oils or fats of chips.
Oxygen is very reactive and likes to combine with other molecules whenever it can, causing chemical changes to take place.
As nitrogen gas is inert in nature so it does not itself react with the food items but prevent rancidity.

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