My biztalk production server does not have Visual stodio installed on the server.
Now i have to create one application in the production server which will use schema from another application which is already deployed in the production server .
I have to reference the schema from the existing application in the new application
is it necessary to have visual studio installed on the production server or there is any other option.
No, it isn't necessary (or desirable IMO) to install VS on BizTalk Production Servers.
What you need to do is to copy the common schema assembly to your development BizTalk environment, and then reference the assembly from your new Project.
If you don't have the source to the referenced schemas, then you can get the schema assembly from the installation directory (usually %PROGRAMFILES%\Generated By BizTalk
if you deploy with the basic MSI export, but may differ if it was installed with the deployment framework etc). Alternatively, the assembly will also be available in the GAC (command line C:\Windows\Assembly\GAC_MSIL\{AssemblyName}\{Version}__{GUID}\Assembly.DLL
)
You can then use the referenced schemas in your new project. Do not add the referenced schema assembly as a resource to your new project as this is already deployed (and an assembly can only 'belong' to one application).