Sandalwood Cultivation: Promise or Peril?

A dramatic protest near Vidhana Soudha in Bengaluru has reignited debate over the economics and regulation of sandalwood cultivation in India. A farmer from Chikkamagaluru publicly cut branches of sandalwood trees to protest compensation offered for trees felled for a highway project. His grievance reflects a larger structural question: can sandalwood truly become a viable commercial crop for Indian farmers, or does it remain a high-risk, long-duration gamble?

From Global Leader to Market Laggard

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India was once the world’s leading producer of sandalwood (Santalum album), prized for its high oil content and fragrance. Today, Australia dominates nearly 69% of global production, while India’s share has fallen to around 20% .

Ironically, Australia began commercial cultivation of the Indian sandalwood variety only in 1999, investing heavily in research and plantation models. India, meanwhile, struggled with restrictive laws, smuggling, and policy inconsistencies. Despite declining production, demand remains robust. The global annual demand is estimated at 5,000–6,000 tonnes, with prices rising steadily .

Why Sandalwood Remains in High Demand

Sandalwood oil is a cornerstone of:

• Perfume and attar industries.
• Ayurvedic and indigenous medicine systems.
• Agarbathi and cosmetic products.

Indian sandalwood contains a higher percentage of essential oil compared to other species. Its oil acts as a stable base in perfumes, enhancing longevity without overpowering other fragrances .

In Karnataka, Karnataka Soaps and Detergents Limited (KSDL) alone requires 8,000–9,000 kg of sandalwood oil annually. Nearly 70% of this is imported from Australia, highlighting India’s supply gap . KSDL’s sales have steadily risen from ₹1,375 crore in 2022–23 to ₹1,786 crore in 2024–25, indicating sustained market potential .

The Economics of a 20-Year Gamble

Sandalwood is not a short-term crop. It takes nearly 15–20 years to develop commercially valuable heartwood — the oil-rich core.

Key economic realities include:

• Price range: ₹3,000–₹15,000 per kg depending on grade.
• Only about 100 kg of heartwood from 1,000 kg of raw wood.
• Estimated net income of ₹1.06 crore per hectare after 15 years, against expenses of ₹28 lakh .

However, these returns are uncertain. Farmers cannot reliably assess heartwood formation in advance. For smallholders with limited land, dedicating acreage for two decades without guaranteed returns is highly risky.

The Shadow Economy: Theft and Smuggling

Approximately 75% of sandalwood in Karnataka is reportedly harvested illegally . Around 450–500 sandalwood theft cases are registered annually, though actual numbers may be much higher .

Farmers incur heavy security expenses — fencing, CCTV, guards, even watchtowers. Despite these measures, theft attempts remain frequent. This high-risk environment discourages wider adoption.

Strict regulation, while intended to prevent smuggling, creates another bottleneck. Farmers must seek Forest Department approval for felling and transit, leading to bureaucratic delays . Officials argue that relaxing rules could endanger forests and wildlife.

Policy Dilemma: Regulation vs Promotion

India faces a classic policy paradox:

• Strict controls protect forests but discourage private cultivation.
• Relaxation may incentivise farmers but increase illegal extraction risks.

Research institutions like ICFRE-IWST are developing fast heartwood-producing varieties and exploring anti-theft technologies such as embedded chips . However, these solutions require capital and technical awareness.

The Union Budget’s promise to revive the sandalwood industry signals policy intent, but success will depend on:

• Research-backed cultivation models.
• Insurance mechanisms for tree crops.
• Transparent digital systems for harvest approvals.
• Subsidised anti-theft technology.

Is Sandalwood Viable for Indian Farmers?

For large landholders with capital and security infrastructure, sandalwood can be profitable. For small and marginal farmers, the risks are substantial:

• Long gestation period.
• High security costs.
• Regulatory complexity.
• Uncertain heartwood yield.

Experts suggest limited cultivation along farm boundaries or mixed-cropping models to reduce risk exposure. Without credible demonstration models and strong institutional backing, large-scale promotion may lead to financial distress rather than prosperity .

What to Note for Prelims?

• Santalum album – Indian sandalwood species.
• Major producing States: Karnataka, Tamil Nadu, Kerala.
• Global leader in sandalwood production: Australia.
• Heartwood – oil-bearing core of sandalwood tree.
• KSDL – Karnataka government undertaking producing Mysore Sandal products.

What to Note for Mains?

1. Analyse the economic viability of long-duration tree crops in India.
2. Discuss regulatory challenges in balancing conservation with commercial cultivation.
3. Examine the impact of illegal trade on high-value forest products.
4. Evaluate the role of research and innovation in reviving traditional industries.
5. Suggest policy reforms to make sandalwood cultivation inclusive for small farmers.

Sandalwood’s fragrance continues to command global markets, but unless policy reform, research, and security concerns are addressed, its cultivation in India may remain an opportunity accessible only to a few — rather than a broad-based rural growth strategy .