Sandalwood Farming in India – Process, Cost & Profit

Indian sandalwood or Chandan is the most expensive commercial tree species and one can become literally a “crorepati” from just an acre of land by sandalwood farming. It is a slow growing evergreen species which can attain a height of 15-25 ft and a girth of about 30-40 inch at maturity.

Sandalwood Tree Overview

Is Sandalwood Farming Legal in India?

YES, growing sandalwood in private land is legal in India but farmers are not allowed to sell the harvested plants directly in the open market. The sandalwood logs are auctioned by the government on behalf of the farmer and then paid to the farmer after deducting govt. fees.

Sandalwood was once a state property irrespective of the land it grew on. Cultivation of sandalwood on private land was banned in India until 2002 and even if one grew it on their land they had no right to cut and sell the plant, the government was the legal owner of the plant. The only place where sandalwood was found was forest areas in south India.

After overexploitation of sandalwood forests in the 1970s, India is currently facing a severe shortage of sandalwood. To handle the situation Karnataka and then Tamil Nadu enacted a law in 2001 and 2002 respectively to allow sandalwood on private land. Other states followed the same path. After lifting the restriction, sandalwood cultivation is gaining momentum. The law has been simplified further and according to the current law-

1. Anyone can plant sandalwood on their property. No licence or permission is required.
2. Registration of every planted sandalwood tree must be done with the district/state forest department by giving registration fees.
3. Felling sandalwood plants without permission is not permitted. To harvest the trees, a felling permit must be taken from the forest department.
4. Harvesting must be done in the presence of a forest range officer.
5. Farmers are not allowed to sell the harvested plants in the open market. The sandalwood logs are auctioned by the government on behalf of the farmer and paid to the farmer.
6. A transit permit must be taken from the forest department to transport harvested sandalwood logs.

The law is not the same across states and one should consult the district forest officer before investing in sandalwood plantation.

Potential Area

Red vs White, Which One to Grow?

Although there are different types of sandalwoods, red and white are the popular ones and are cultivated in India. Before starting a sandalwood plantation almost everyone is confused about the variety to be planted. Here are a few facts about the varieties to help you choose the preferred one.

White Sandalwood

• White variety is the real sandalwood (Santalum album).
• White sandalwood is a highly valued tree for its aromatic oil content.
• The oil extracted from white sandalwood is used in the soap and perfumery industry.
• The wood is used for making handicrafts and medicinal purposes.
• White sandalwood can be harvested within 15-20 years in a commercial plantation.

Red Sandalwood

• The red variety is from another family and is called red sanders (Pterocarpus santalinus).
• This is an endemic species and the production is very low.
• Red sandalwood does not have any aromatic oil and the tree is valued for its rich red coloured wood and use in traditional medicines. The wood is used for making musical instruments, furniture, handicrafts and flavouring alcoholic beverages.
• Red sandalwood takes much more time (50-60 years) than white sandalwood to mature.

From a commercial point of view white sandalwood is more profitable than red sandalwood and preferred by cultivars. The information in this article is all about white sandalwood or Santalum album.

Uses of Sandalwood

Sandalwood is not like just another hardwood and has different characteristics and uses. Most of the parts of a sandalwood tree have commercial uses. There are two main products in Chandan farming- 

1. Heartwood: The central hard part of the tree trunk is called heartwood and is collected by chipping off the outer softwood or sapwood manually. This heartwood is the main product of a sandalwood tree but the branches and even the roots have commercial uses. Sandalwood has religious importance in Hinduism and other religions. It is fine grained and excellent for woodcarving. The wood is used for handicrafts and specialty furniture. Powdered heartwood is used in traditional medicine and useful to cure various conditions.
2. Sandalwood oil: Sandalwood oil is the oil extracted from the heartwood. The heartwood is powdered and then the oil is extracted by distilling and filtering the powder. Sandalwood roots and branches are also used to extract oil. Sandalwood oil has aromatic and therapeutic values and is used in soap, perfumes, cosmetics. The oil is also used in aromatherapy and medicinal purposes.
3. By-products: The sapwood is used to make handicraft, toys and carrom coins etc. Sapwood chips and the leftover heartwood powder after extracting the oil is used to make incense sticks.

Demand

India once produced almost 4000 MT of sandalwood which was ⅘ of global sandalwood and sandalwood oil. But, due to heavy exploitation of sandalwood forest in the 1970s, the population of sandalwood depleted and India turned into a net importer of sandalwood from the largest producer and exporter. Today India’s sandalwood production is reduced to only 400 MT.

After India’s stumble down from the export market Australia heavily invested on East Indian Sandalwood plantation and now the largest exporter of Indian sandalwood. India is now importing sandalwood powder and sandalwood oil from Australia and African countries.

Global annual demand for sandalwood is about 20,000 MT and sandalwood oil is 1000 MT. The price of sandalwood is increasing rapidly as the gap between demand and supply of sandalwood is increasing steadily. Sandalwood oil price doubled during 2017-2022. The market is expected to grow to USD 165 million or INR 1200 crores by the end of 2027.

India has a huge scope of Chandan cultivation. To fulfil domestic demand and compete with Australia and Africa in the international market India needs to sharply increase area under sandalwood cultivation. To regain its leading position, cultivation of sandalwood on private land is crucial.

State and central governments are encouraging farmers to take up sandalwood cultivation. State-owned Karnataka Soaps and Detergents Ltd, the largest producer of sandalwood oil and sandalwood products which produces the famous Mysore Sandal Soap has entered into contract farming with farmers.

Sandalwood Cultivation Process

1. Varieties

There are 16 varieties around the world but the East Indian sandalwood (Santalum album) and Australian sandalwood (Santalum spicatum) have excellent commercial value and are grown on a large scale. Indian sandalwood is known as the queen of sandalwood for its superior quality of essential oil. Indian sandalwood contains more than 90% sesquiterpene alcohol of which 50-60% is α-santalol and 20-25% is β-Santalol which makes Indian sandalwood oil the best in this category.

2. Propagation

Sandalwood seedlings are widely available and are the most used propagation technique in India. Apart from seeds, sandalwood can also be propagated through vegetative propagation by clonal and tissue cultured plants. Vegetative propagation is promising but there are problems with bulk availability.

3. Planting

Pits of a size of 18” X 18” X 18“ are dug and left open for solarization. Thereafter the pits are filled with topsoil mixed with organic manure and healthy plants of at least 1 ft. height are planted.

4. Host Plant and Intercropping

Intercropping in sandalwood plantation is easy and kind of mandatory. Sandalwood is a hemi-parasitic plant and it requires host plants to survive. This makes it an ideal plant for agroforestry. The sandalwood plant spreads roots and attaches to nearby roots of other plants making those host plants for water and nutrients. Without host plants seedlings can live up to 1-3 years, thereafter the growth is shunted and eventually they die.

Sandalwood needs a primary host, intermediate host and a long term secondary host at different stages of its life. Host plants should be chosen from over 150 suitable species. Leguminous or nitrogen fixing plants like pigeon pea, mimosa pudica, melia dubia, sesbania, pongamia pinnata, cassia siamea, etc. make excellent host plants. Casuarina equisetifolia, wrightia tinctoria, etc. non-leguminous plants and horticulture species like amla, guava, pomegranate, mango, custard apple, citrus fruits, moringa, etc. also make good host plants. Vegetables and papaya can also be intercropped for short term return.

Host plants can be planted in the same pit or in a separate pit in a quincunx pattern. To maximise return from host plants high density plantation in the same row (in different pits) can also be followed.

5. Spacing

6. Care

Sandalwood responds well to organic manure and requires regular watering but the field must be well drained as sandalwood is sensitive to water stagnation. One session of irrigation after every 2-3 weeks during summer is required.

Sandalwood spike disease is the most feared disease and has no cure. In this disease the infected plant dies within 2-3 years. The best way to fight spike disease is selecting disease resistant planting material.

7. Protection

Protection of sandalwood trees is the most challenging task in sandalwood cultivation. Trouble starts mainly after 8 years when the heartwood formation starts. There are many ways to protect sandalwood trees from theft. Most effectives are-

1. High compound wall
2. Solar electric fence
3. Fencing with chain link mesh
4. Installing metal cage around individual trees
5. Covering the tree trunk with barbed wire mesh
6. Installing touch or motion sensors
7. Attaching security microchips to sandalwood plants
8. Patrolling by guard dogs

Multilayer protection can be achieved by combining two or more security measures listed above.

Harvesting and Yield

The heartwood starts forming after 8 years and harvesting starts after 12-15 years of planting. Better results are obtained if harvested after 15 years but 25-30 years of rotation period is optimal for heartwood and oil yield. Institute of Wood Science and Technology (IWST) recommends a 15 year rotation cycle for maximum economic benefit.

Harvesting is done by completely uprooting the trees as the roots also contain oil. Few farmers only prune the branches every year after 10-12 years to get a regular income and the plant is uprooted completely after 25-30 years when it gets fully matured.

The oil is extracted by heartwood separation, powdering, distilling and then filtering. The income from a sandalwood plantation depends on the yield of heartwood, the percentage of oil content in it and the quality of the oil. Superior quality oil contains more santalol.

An indicative yield from a 15 year old sandalwood plant is as below.

1. Heartwood: A 15 year old sandalwood plant is weighted between 120-180 kg and expected to yield 12-18 kg of heartwood in cultivated conditions.
2. Sapwood: 50-70 kg of sapwood can be obtained from a 15 year old sandalwood tree.
3. Sandalwood Oil: Heartwood oil content varies between 2.0-6.2% depending on various factors. The amount of oil found per kilogram of different parts of a sandalwood tree is- a) Roots: 60 gm, b) Stem: 40-50 gm and c) Branches: 30-40 gm

Marketing

There is no problem in sandalwood marketing as the government itself facilitates the sale. Farmers are not allowed to sell sandalwood directly to oil manufacturers or consumers. After getting permission from the forest department the trees are uprooted. The wood is then auctioned by the state forest department and payment is made to the farmer after cutting a harvesting and processing fee of 20%. The farmers get the remaining 80% of the auction price.

The current government rate for heartwood is around Rs. 6500-7500 per kg and sandalwood oil is around Rs. 150000 per kg. The retail rate for sandalwood in the domestic retail market is around Rs. 16000-20000 per kg. The rate is increasing around 25% year-on-year. The international market rate is 15-20% higher than the domestic rate. The sapwood can also be marketed at a rate of Rs. 45000-60000/tonne in the domestic market.

Should You Grow Sandalwood?

Absolutely! Sandalwood is one of the most profitable tree species to grow and from individual households to large farmers there is a very high scope for sandalwood cultivation. 

Individual households can grow a few sandalwood plants in the backyard or kitchen garden within the boundary. Small farmers can grow sandalwood with host plants along their farm boundary, medium and large farmers can go for block plantation with host plants and other crops. Individuals with high non-farm income can invest on sandalwood block plantation if they can arrange dedicated security and farm management staff.

Advantages

• Sandalwood can really make one crorepati, it is one of the most profitable trees to grow.
• Relatively low rotation period, only 12-15 years.
• Grows on a variety of climate and soil including stony and gravelly soils.
• Cultivation is relatively easy and does not require much water or effort.
• As sandalwood is a natural fit for an agroforestry system, it can be grown with other horticulture crops.
• The supply of sandalwood is much less than the demand.
• Marketing is super easy as the government itself facilitates the sale.
• Sandalwood rate is increasing 25% year-on-year, more than any other agroforestry species. So, the actual return after 12 or 15 years will be much higher than the current market.

Disadvantages

• The strongest reason not to grow sandalwood is the security concern of the plants. Sandalwood must not be grown without proper security measures.
• Must generate income from host plants to sustain the rotation period as the input cost increases due to proper security arrangement.
• Legal hassle is another constraint. The sandalwood grower must go through various legal processes to cultivate, harvest, transport and sell the produce.
• Farmers are bound to sell the trees to the government agencies at a relatively much lower rate than the market.
• If the proposed area is prone to spike disease then it is better not to cultivate sandalwood if disease resistant saplings are not found.

A Sample Sandalwood Cultivation Project

Below is a sample project of sandalwood (Santalum album) cultivation based on the following assumptions. Sandalwood saplings will be planted in 1 acre of land with a plant spacing of 12ft X 12ft. Custard apples and moringa will be planted in a quincunx pattern as host plants. In this farm layout about 900 saplings will be planted (300 each for sandalwood, moringa and custard apple).

Cost of planting material is considered Rs. 35/plant for sandalwood, Rs. 15/plant for moringa and Rs. 60/plant for custard apple of NMK Gold variety.

1. Sandalwood Farming Cost

2. Sandalwood Farming Profit

Conclusion

The actual market price of sandalwood is much higher than the government auction price but it is illegal to sell sandalwood directly to customers with the involvement of the government. Another thing to consider is that the selling price of sandalwood is calculated on the basis of current price but the price is increasing 20-25% year on year. If we calculate a 20% CAGR of current price Rs. 7000/kg for 15 years then it comes out to a whopping Rs. 1,00,000/kg after 15 years.

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