A Study of the Indian Sandalwood Trade

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TED Case Studies

 

Sandalwood Case

 

CASE NUMBER: 428

CASE MNEMONIC: SANDALWD

CASE NAME: Indian Sandalwood Trade

 

I. Identification

1. The Issue

 

The Indian sandalwood tree has become endangered in recent

years, and in an attempt to curb its possible extinction the Indian

government is trying to limit the exportation of sandalwood. The

tree is already government controlled, and removal is prohibited

whether on private or temple grounds until the tree is thirty years

old. This has not stopped many poachers from cutting trees down as

soon as authorities are not watching. Smuggling of sandalwood has

created socio-economic and law and order problems in areas

bordering the state of Tamil Nadu.

 

2. The Description

 

In India, sandalwood is primarily distributed on the Deccan

Plateau. The total extent of its distribution is approximately

9000 km2 of which 8200 km2 is located in the states of Karnataka

and Tamil Nadu. The heartwood of the fragrant tree is considered

sacred and prized. The oil distilled from it, 60 kg of oil can be

extracted from a ton of heartwood, is used in the formulation of

perfumes, lotions, soap and candles. Mashed into a paste, it is

used in folk medicine and spread on the skin to purify the

complexion and heal rashes. It is dabbed on the forehead during

religious ceremonies and burnt as incense in temples. The

sandalwood industry employs thousands of people, especially in

Mysore, known as "Sandalwood City." Employees work in incense

factories, rolling sandalwood paste on bamboo skewers. Craftsmen

carve the hard yellow wood into boxes, combs, beads and statues of

Hindu gods and elephants.

Trade in sandalwood dates back to the beginning of trading in

India. Realizing its value, the Sultan of Mysore declared it a

royal tree in 1792. It continues to retain that place today and no

individual may own a sandalwood tree. Even if the tree grows on

private land it is owned by the government. However, an individual

is entitled to receive seventy five percent of its value as a bonus

for growing and protecting the trees. Due to its high value and

increased demand in internal and external markets, sandalwood

prices have skyrocketed. The increase in price is partly due to a

decrease in supply during the 1930s-1950s. In 1950, 4,000 tons of

heartwood were produced, in 1990, this was down to 2,000 tons.

Increase in demand can be attributed to the popularity of

aromatheraphy and trends in the cosmetic industry toward natural

products. Legislation by the Indian government to protect the

sandalwood tree has been inconsistent as the sandalwood trade

represents a significant area of export to the U.S. and Middle

East.

Exports to the U.S. are primarily for use in the perfume

industry. The oil is an excellent base and fixative for other high

grade perfumes. By itself it is a mild, long-lasting sweet

perfume, but the industry finds that it can blend well with other

perfumes and does not impart its fragrance when used as a base.

There are several hundred products that use sandalwood oil.

Of the traditional areas in Southeast Asia where sandalwood is

found, only India has made a strong effort to create plantations

which are continually harvested. Most of the production is

earmarked for the extraction of oil and the rest is used for

carvings. In Australia, much of the remaining strands are

protected with the rest auctioned off to the highest bidder. Few

sandalwood trees are left in the Indonesian archipelago, while

relatively recently discovered supplies in Papua New Guinea and the

South Pacific are in danger of being squandered by local villagers,

who cut them before they are mature. The scent of sandalwood is

stronger and the value of the wood much higher the longer one waits

to harvest the tree. A tree is considered not worth cutting down

until it is at least sixty years old.

Although trade in Indian sandalwood is officially restricted,

smuggling remains a serious threat to the tree. In May of 1993 the

biggest and costliest manhunt in Indian history was launched to

track down the leader of India�s major sandalwood smuggling ring,

Veerapan. Approximately 600 Border Security Force troops were used

to back up a special police task force which has been combing the

jungles of Tamil Nadu and Karnataka states. The notorious Veerapan

carries a four million rupee ($132,000) bounty on his head and has

been on the run from the police since killing his first elephant at

the age of fourteen. He claims to have killed 2,000 elephants for

their ivory before entering the more lucrative sandalwood trade.

He was once arrested in 1986, but escaped from police custody and

has since embarked on several killing sprees. The worst was in

April of 1993 when 21 members of a police posse were blown up with

land mines after Veerapan lured them into an ambush. Always

dressed in olive fatigues, Veerapan is constantly on the move and

said to have approximately sixty camps in 6,000 km of jungles near

his birthplace, Gopi Natham, 75 miles southeast of Mysore.

According to police and forestry officials in Bangalore and

Mysore, Veerapan's gang has amassed a small fortune cutting

sandalwood illegally from the state owned forests on both sides of

the Cauvery River which forms the border between the Tamil Nadu and

Karnataka. In a few years, Veerapan has smuggled sandalwood worth

1 billion rupees. Inspector-General Kodandaramaiah, of the

Karnataka police, estimates that approximately 75% of the

sandalwood leaving his state is smuggled. Veerapan has become rich

and the hundreds of villagers who help him cut and transport the

wood have profited accordingly. Veerapan apparently pays 10 rupees

a day to anyone locating the trees scattered at random across the

150 square miles of forest. He pays 25 rupees a day for cutting

and carrying. This is more than double what the villagers can earn

performing forest chores for the government.

Veerapan has become a modern day Robin Hood and is loved by

the poor who are either too frightened or too loyal to betray him.

The gang smuggles most of its haul north to the oil and incense

factories of Uttar Pradesh and Bihar. Much of the wood ends up in

the Middle East, where demand for the wood and its oil extract

soars, especially at the end of the Moslem fasting month of

Ramadan. Sandalwood is among the perfumes approved by Islamic

tradition, which also include musk, amber, jasmine and myrrh.

Saudi and other Gulf customers haggle over the prices as a small

vial of the perfume sells for hundreds of dollars. They buy the

raw wood to use as incense and the oil as perfume for the Eid-al-

Fitr holiday ending Ramadan, when Moslems abstain from food and

drink from dawn to dusk.

A Saudi wandering through the dozens of perfume shops

described sandalwood "as precious as gold" which he kept "in a safe

just like jewelry and other important documents."(1) Saudi Arabia

is the biggest importer of sandalwood in the Gulf, with nearly 500

tons of the perfume sold annually for more than 2.5 billion riyals

(670 million dollars), according to official Saudi figures. The

wood is openly imported from Cambodia, Malaysia, Indonesia,

Vietnam, Burma and Thailand although India was the chief source of

sandalwood in the past. Indian sandalwood is shipped secretly to

the Gulf, but it is reserved for upscale customers. Orders are in

the range of millions of dollars, because the wood costs up to

13,700 dollars per kilogram. A vial of the oil extract costs

between 400 and 1,000 dollars.

 

3. Related Cases

 

(1) MESQUITE case

(2) TEAK case

(3) THAILOG case

(4) CAMWOOD case

(5) TIMOWL case

(6) CEDAR case

(7) CEDARS case

(8) VIETWOOD case

(9) MALAY case

 

Key words:

(1): Trade Product=Wood

(2): Domain=Asia

(3): Environmental Problem=SPLL or Species Loss Land

 

4. Draft Author: Cindy Ramanathan (April 1997)

 

II. Legal Clusters

 

5. Discourse and Status: DISagreement and INCOMPlete

 

6. Forum and Scope: INDIA and UNIlateral

 

7. Decision Breadth: (1) INDIA

Any decision made by the Indian government, or any of its

state governments, to impose a ban on sandalwood exports or

stricter cutting rules will primarily affect revenues in their

respective jurisdictions. The continued demand for sandalwood and

the resulting decrease in supply will drive the price up; this

will affect other nations that import sandalwood and sandalwood by-

products, such as Saudi Arabia and the U.S. Other suppliers such as

Australia and Indonesia will most likely scramble to fill the

demand and the black market trade in sandalwood will continue.

 

8. Legal Standing: LAW

The Indian government currently controls the cutting of

sandalwood trees. However, while there are laws in effect

concerning the cutting of sandalwood, there are no laws barring its

export. Until recently there has been limited enforcement of the

law and smuggling has resulted.

 

III. Geographic Clusters

 

9. Geographic Locations

 

a. Geographic Domain: ASIA

b. Geographic Site: SOUTH ASIA

c. Geographic Impact: INDIA

 

Sandalwood harvesting take place mainly in Asia, specifically

South and Southeast Asia. This particular case deals with India

because India is the traditional supplier with the strictest

protection measures. Despite India's recognition of the need to

protect the sandalwood tree and instituting cutting laws to this

effect, smuggling has become a threat to its existence.

 

10. Sub-National Factors: YES

While sandalwood legislation takes place on the national

level, a ban on sandalwood exports is unlikely due to opposition on

the local level. Many people are employed by the sandalwood

processing industry and certain areas of the country receive

substantial revenues from the trade in sandalwood creating an

effective lobby. An additional important sub-national force is

that the areas of India that possess sandalwood are rural with an

overwhelmingly poor population. It is this poverty that the

smuggling rings exploit and the local villagers benefit from aiding

the illegal trade. The villagers cooperate with the sandalwood

smugglers making effective regulation of the sandalwood trade

difficult for local officials.

 

11. Type of Habitat:TEMPERATE

Sandalwood is an evergreen tree which generally grows in the

dry, deciduous forests of the Deccan Plateau. A circle with the

city of Bangalore as its center and a radius of 200 km is the main

zone of the natural distribution of sandalwood. It can grow to a

height of 20 m and obtain a girth of 1.5 m. It thrives best under

rainfall conditions of 500-2000 mm and at elevations of 650-1200 m.

It can occur beyond these ranges, but under high rainfall

conditions the heartwood formation is negligible. The dry habitat

makes it prone to fire damage.

Sandalwood is capable of growing in different kinds of soils

like clay, sand, laterite and loam. Even very poor or rocky soils

can support sandalwood. If protected, established plants start

fruiting and regenerating naturally.

 

IV. Trade Clusters

 

12. Type of Measure: REGulatory BAN

Recent attempts by the national government to introduce

legislation to limit the exportation of sandalwood have been met by

opposition by a powerful sandalwood lobby. Many legitimate

businesses are involved in the sandalwood trade making an export

ban unlikely. Local and national efforts to clamp down on

smuggling have resulted in violence with little effect on the

illegal trade in sandalwood.

 

13. Direct v. Indirect Impacts: INDirect

The Government of India internally protects the sandalwood

tree by maintaining control over its harvesting. The effect on

trade is indirect because there are no restrictions on the wood or

its by-products once it is ready for export.

 

14. Relation of Trade Measure to Environmental Impact

 

a. Directly Related to Product: YES, Sandalwood

b. Indirectly Related to Product: NO

c. Not Related to Product: NO

d. Related to Process: YES, Species Loss Land (SPLL)

 

15. Trade Product Identification: Sandalwood

 

16. Economic Data

Due to sandalwood�s high value and rising demand in internal

and external markets, sandalwood prices have skyrocketed, as shown

in Table 1.

 

TABLE 1: Sandalwood Prices, 1900-1990

 

Year Rs/Ton

 

1900 365

1933 1,000

1965 6,000

1970 10,000

1980 31,000

1987 78,000

1990 160,000

1990 78,000

 

 

Note: US$=Rs 17

Source: "Status and Cultivation of Sandalwood in India,"

Symposium of Sandalwood in the Pacific. (Honolulu: Hawaii), April

9-11, 1990, p. 68

 

The rise in prices is partly due to a decrease in supplies.

During the 1930s through the 1950s, the country's production was

roughly 4,000 tons of heartwood a year; now it is only 2,000

tons.

The recent clamp down by authorities to stop illegal trade

in sandalwood has resulted in higher prices (10-12 percent above

normal) for sandalwood at recent auctions. The volume of oil

related exports does not seem to be affected. Indian exports to

the U.S. are exceeding last year�s numbers, already amassing

7,000 kilos, according to figures from the U.S.Department of

Commerce, 2,000 kilos more than this time last year.

17. Impact of Trade Restriction:MEDIUM

An export ban would have significant effects on employment

in geographic areas that process the raw wood. In addition, it

would cut into a significant area of export to the United States,

making such a trade restriction improbable.

 

18. Industry Sector: WOOD

 

19. Exporters and Importers: India and MANY

 

V. Environment Clusters

 

20. Environmental Problem Type: SPLL

DEFORestation is side effect of this case, but the primary

concern is the loss of a particular plant species.

 

21. Name, Type, and Diversity of Species: Santalum album,

ENDANGered

 

22. Resource Impact and Effect: LOW and PRODUCT

 

23. Urgency and Lifetime: HIGH and 100s of years

 

24. Substitutes: SYNTHetics

Sandalwood oil substitutes have been developed for use in

the perfume industry. However, most top grade perfumes still use

sandalwood oil as their base. The historical prestige associated

with sandalwood combined with the wood's natural qualities makes

chemical substitutes unappealing at present.

The Indian government instituted policies concerning the

planting and harvesting of sandalwood trees long ago. It is the

enforcement of these practices that is the problem. However,

recent renewed efforts to stop illegal cutting should help the

conservation effort.

 

VI. Other Factors

 

25. Culture: YES

Culture is a factor for both the exporting and importing

countries. Sandalwood is part of Indian culture and heritage.

It is the epitome of excellence, imparting fragrance even to the

axe that cuts it. Sandalwood is mentioned in the one of the

oldest pieces of Indian literature, the Ramayana (around 2,000

B.C.). Sandalwood has nearly fifteen different names in various

Indian languages, "chandan(a)" being the Hindi name.

In the past, it has been said that Santalum album was

introduced to India from the Timor Island of Indonesia.

Sandalwood has such strong links with Indian culture and

literature that it is difficult to support this hypothesis of its

introduction. The wood is used for burning in certain rituals by

Hindus and Buddhists. It is also believed to have antiseptic,

cosmetic and medicinal qualities. The wood paste and oil are used

as coolants to treat burns. The wood paste is also smeared on

the skin to purify the complexion and heal rashes. There are

descriptions by Kalidasa of this use of sandalwood in his

Sanskrit epics (300 B.C.) Sandalwood oil is used in soaps that

clarify the complexion. The oil also has an important place in

the indigenous system of medicine. Sandalwood oil has been used

in the treatment of bronchitis and diseases of the urinary tract.

It is also considered to be a cure against the migraine. The

hard yellow wood is used for carving into combs, beads and

religious artifacts. The sapwood is used for manufacturing joss

sticks, incense sticks burned in Hindu temples. Because of this

long history, it is inconceivable that Indians will stop using

sandalwood products despite the dwindling supply and increasing

cost.

As previously mentioned, the reverence given to sandalwood

also extends to the Middle East where the oil is regarded as a

luxury item. It is one of the few approved scents for use in the

Islamic religion. The tradition of using sandalwood and its by-

products in religious ceremonies has contributed to the current

problem.

 

26. Trans-Boundary Issues: NO

 

27. Rights: YES

The trade in Indian sandalwood has raised several human

rights concerns. The illegal smuggling rings have benefited

local village populations financially. The wages paid by the

rings are higher than the amount the villagers could earn legally

.. However, the villagers are threatened by the ring�s leaders to

remain silent if questioned by authorities. Ringleaders have

killed informants to make an example of them to the others.

There are also rumors of human rights violations concerning the

conduct of police officials. Authorities apparently have

harassed the locals to give information that would aid in the

capture of the smuggling ring�s leaders. There are tales of

torture and brutality on both sides at the expense of the rural

population.

 

 

28. Relevant Literature

 

Murphy, Kevin. "Incense Maker Finds Success is Sweet,"

International Herald Tribune. October 9, 1995.

 

Nagreni, H.C. and Rai, S.N. "Influence of Host Plants on

Growth of Sandal," My Forest, Vol. 26, pp. 156-60.

 

Rai, Shobha. "Status and Cultivation of Sandalwood in

India," Symposium of Sandalwood in the Pacific. (Honolulu:

Hawaii), April 9-11, 1990, pp.65-71.

 

Trabelsi, Habib. "Gulf Demand for Asian Sandalwood Perfume

Soars for Muslim holiday," Agence France Presse. February 2,

1997. (Nexis-Lexis)

 

"Sandalwood Cutting Rules May Limit Indian Oil Supply."

Chemical Marketing Reporter. October, 1993, p.19.

 

 

Notes

 

(1) Habib Trabels, "Gulf demand for Asian sandalwood perfume

soars for Muslim holiday," Agence France Presse, February 2, 1997

(Lexis-Nexis retrieval).

http://www.american.edu/projects/mandala/TED/sandalwd.htm

 

May, 1997