Business Standard

Corporate sector enters sandalwood plantation

Mahesh Kulkarni  |  Bangalore 

Pragmatic loosening of state clamps encourages commercial plantation, but much remains.

The severe shortage of sandalwood (chandan), hitting user industries like perfume, soaps and medicine, has encouraged pragmatic changes in the rules on cultivation, encouraging the to embark on plantation of the endangered wood species.

There are no clear statistics on the extent of sandalwood cultivation in India. It is estimated, however, that in recent years, there has been new plantation on as much as 15,000 acres in southern states and parts of western and northern India.

Companies such as Surya Vinayak Industries, and Ltd and a host of individual farmers with large land holdings have taken up commercial plantation of sandalwood in the states of Madhya Pradesh, Rajasthan, Karnataka, Andhra Pradesh, Gujarat and Maharashtra. Significant, since the sector was under strict government control; the wood can still be sold only through government auctions anywhere.(Click here for graph)

Till recently, there were severe restrictions on cultivation of sandalwood. If it happened to come up, the plant became the property of the state. The restrictions have been relaxed; cultivation is now allowed and one may apply for a government subsidy for doing so.

The changes followed an alarming decline in natural plantations across southern states in the last decade, due to rampant smuggling and illegal trade. The auction of sandalwood by different state governments dropped from a high of 2,500 tonnes in 1993-94 to just 300 tonnes in 2008-09. The governments of Tamil Nadu and Kerala collectively auctioned less than 300 tonnes during 2010-11. Tamil Nadu conducts auctions thrice a year, while Kerala holds it once a year. Karnataka, a leading producer, has not held any auction for the past three years.

Pragmatic changes
“The governments of Karnataka and Tamil Nadu amended the sandalwood laws in 2001 and 2002, respectively, and made the grower an owner of the wood. This amendment encouraged the farmers to take up cultivation on a commercial scale,” said V S Venkatesha Gowda, deputy general manager (R&D), Karnataka Soaps and Detergents Ltd, the state-owned maker of sandalwood soap and oil.

Others are changing, too. Kerala is in the process of liberalising its rules on cultivation. The government of Gujarat has sent officials to examine the situation in Karnataka and also in Australia, to see what could be done. There are also moves to get some uniformity in laws among states, to encourage cultivation.

Gowda said the production of sandalwood may soon reach around 350 tonnes per annum, he said. “Till a few years ago, KS&DL was producing about 150 tonnes of sandalwood oil per annum. Now, we can hardly produce about two tonnes. This shows how fast the sandalwood tree is disappearing in India,” he noted.

The price of sandalwood has, correspondingly, seen a sharp rise, from Rs 1 lakh per tonne in 1990 to Rs 50 lakh per tonne last year. The sale of wood attracts 12 per cent value added tax and 14 per cent excise duty when used as an ingredient in soaps by companies like KS&DL. Sandalwood oil has surged from Rs 20,000 per kg in 2001-02 to Rs 140,000 per kg in 2010-11.

Sandalwood grows prominently in arid, parched land. It is the key ingredient in the manufacture of attar, perfume, soaps and toiletries, chewing scented tobacco, pan masala and medicines. The oil is used to treat a variety of medical ailments. It is also supposed to be a mood enhancer.

In natural conditions, the sandalwood tree takes at least seven years to produce scented heartwood and its growth is restricted due to climatic factors, soil, vegetation, fire, grazing and human interventions. Under these conditions, a fully developed tree requires about 30-35 years for harvesting.

Plantation-grown trees show heartwood formation in about three to four years and develop good heartwood, ranging in diameter from 15 cm to 25 cm, in about 12-15 years. Harvesting at this age is much more economical and commercially viable. The tree is a partial root parasite, requiring another host tree by its side, through which it draws nutrient for good growth. The trade is limited to a few companies. KS&DL and Delhi-based Ltd are major players, having been around for quite a while. There are some smaller trading firms, too, which participate actively in the auctions held by state governments.

Room for growth
At present, the Tamil Nadu forest department holds about 650 tonnes of sandalwood and releases 150-200 tonnes every three months. The forest department of Kerala holds less. The Maharashtra government has a direct sale arrangement with KS&DL. “We are ready to buy any quantity of sandalwood available from anywhere in the country at prevailing market prices, provided it is a legal sale,” Gowda said.

V S Mani, consultant for Surya Vinayak Industries, which manufactures sandalwood oil and perfumery compounds, said it had taken up the commercial plantation of sandalwood in a big way in Katni district of Madhya Pradesh. The Dharampal Satyapal Group, maker of Rajnigandha pan masala, has also undertaken plantations in Madhya Pradesh. Bangalore-based Namdhari Seeds has taken up cultivation at Pavagada in Tumkur district of Karnataka.

A large number of farmers and individuals with large land holdings have taken up commercial plantations in Karnataka, Maharashtra, Andhra Pradesh and Rajasthan. Presently, there is no natural regeneration of sandalwood trees in the southern states, except Kerala, where close to 3,000 acres is under natural cultivation.

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Corporate sector enters sandalwood plantation

Pragmatic loosening of state clamps encourages commercial plantation, but much remains.

Pragmatic loosening of state clamps encourages commercial plantation, but much remains.

The severe shortage of sandalwood (chandan), hitting user industries like perfume, soaps and medicine, has encouraged pragmatic changes in the rules on cultivation, encouraging the to embark on plantation of the endangered wood species.

There are no clear statistics on the extent of sandalwood cultivation in India. It is estimated, however, that in recent years, there has been new plantation on as much as 15,000 acres in southern states and parts of western and northern India.

Companies such as Surya Vinayak Industries, and Ltd and a host of individual farmers with large land holdings have taken up commercial plantation of sandalwood in the states of Madhya Pradesh, Rajasthan, Karnataka, Andhra Pradesh, Gujarat and Maharashtra. Significant, since the sector was under strict government control; the wood can still be sold only through government auctions anywhere.(Click here for graph)

Till recently, there were severe restrictions on cultivation of sandalwood. If it happened to come up, the plant became the property of the state. The restrictions have been relaxed; cultivation is now allowed and one may apply for a government subsidy for doing so.

The changes followed an alarming decline in natural plantations across southern states in the last decade, due to rampant smuggling and illegal trade. The auction of sandalwood by different state governments dropped from a high of 2,500 tonnes in 1993-94 to just 300 tonnes in 2008-09. The governments of Tamil Nadu and Kerala collectively auctioned less than 300 tonnes during 2010-11. Tamil Nadu conducts auctions thrice a year, while Kerala holds it once a year. Karnataka, a leading producer, has not held any auction for the past three years.

Pragmatic changes
“The governments of Karnataka and Tamil Nadu amended the sandalwood laws in 2001 and 2002, respectively, and made the grower an owner of the wood. This amendment encouraged the farmers to take up cultivation on a commercial scale,” said V S Venkatesha Gowda, deputy general manager (R&D), Karnataka Soaps and Detergents Ltd, the state-owned maker of sandalwood soap and oil.

Others are changing, too. Kerala is in the process of liberalising its rules on cultivation. The government of Gujarat has sent officials to examine the situation in Karnataka and also in Australia, to see what could be done. There are also moves to get some uniformity in laws among states, to encourage cultivation.

Gowda said the production of sandalwood may soon reach around 350 tonnes per annum, he said. “Till a few years ago, KS&DL was producing about 150 tonnes of sandalwood oil per annum. Now, we can hardly produce about two tonnes. This shows how fast the sandalwood tree is disappearing in India,” he noted.

The price of sandalwood has, correspondingly, seen a sharp rise, from Rs 1 lakh per tonne in 1990 to Rs 50 lakh per tonne last year. The sale of wood attracts 12 per cent value added tax and 14 per cent excise duty when used as an ingredient in soaps by companies like KS&DL. Sandalwood oil has surged from Rs 20,000 per kg in 2001-02 to Rs 140,000 per kg in 2010-11.

Sandalwood grows prominently in arid, parched land. It is the key ingredient in the manufacture of attar, perfume, soaps and toiletries, chewing scented tobacco, pan masala and medicines. The oil is used to treat a variety of medical ailments. It is also supposed to be a mood enhancer.

In natural conditions, the sandalwood tree takes at least seven years to produce scented heartwood and its growth is restricted due to climatic factors, soil, vegetation, fire, grazing and human interventions. Under these conditions, a fully developed tree requires about 30-35 years for harvesting.

Plantation-grown trees show heartwood formation in about three to four years and develop good heartwood, ranging in diameter from 15 cm to 25 cm, in about 12-15 years. Harvesting at this age is much more economical and commercially viable. The tree is a partial root parasite, requiring another host tree by its side, through which it draws nutrient for good growth. The trade is limited to a few companies. KS&DL and Delhi-based Ltd are major players, having been around for quite a while. There are some smaller trading firms, too, which participate actively in the auctions held by state governments.

Room for growth
At present, the Tamil Nadu forest department holds about 650 tonnes of sandalwood and releases 150-200 tonnes every three months. The forest department of Kerala holds less. The Maharashtra government has a direct sale arrangement with KS&DL. “We are ready to buy any quantity of sandalwood available from anywhere in the country at prevailing market prices, provided it is a legal sale,” Gowda said.

V S Mani, consultant for Surya Vinayak Industries, which manufactures sandalwood oil and perfumery compounds, said it had taken up the commercial plantation of sandalwood in a big way in Katni district of Madhya Pradesh. The Dharampal Satyapal Group, maker of Rajnigandha pan masala, has also undertaken plantations in Madhya Pradesh. Bangalore-based Namdhari Seeds has taken up cultivation at Pavagada in Tumkur district of Karnataka.

A large number of farmers and individuals with large land holdings have taken up commercial plantations in Karnataka, Maharashtra, Andhra Pradesh and Rajasthan. Presently, there is no natural regeneration of sandalwood trees in the southern states, except Kerala, where close to 3,000 acres is under natural cultivation.

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