The three major producers of sandalwood — Karnataka, Kerala and Tamil Nadu — have received lukewarm response from user industries and temple trusts for the auction of the precious wood. Of 150 tonnes put on auction last month by the three states together, hardly 12 tonnes have been sold.
An exorbitant price for the wood, which is known for its fragrance and medicinal properties, is cited as the major reason for the poor response. Karnataka managed to sell about 10 tonnes and Kerala another two to three tonnes.
In Tamil Nadu, many backed out due to the very high non-refundable participation fee. The Tamil Nadu forest department had put on auction about 100 tonnes and had postponed the auctions, industry sources said.
“Heartwood is priced at Rs 48-50 lakh a tonne and mixed wood or branches are priced in the range of Rs 24 lakh, making it out of reach for many buyers,” an official from Karnataka Soaps & Detergents Limited (KS&DL), told Business Standard, on condition of anonymity.
He said KS&DL, the state-owned enterprise that makes pure sandalwood soap, among other products, was a lone participant at the Tamil Nadu auctions. But, the government of Tamil Nadu postponed the auctions.
KS&DL did not participate in the auctions held by the forest department of the Kerala government. Kerala had put on auction about 40 tonnes, managed to sell two-three tonnes to a temple trust from south India. However, KS&DL purchased nine out of 10 tonnes sold through electronic auctions in Karnataka, he said.
Another major reason for the poor response is the availability of sandalwood oil at lesser rates in some places in north India.
Presently, sandalwood oil prices are ruling at around Rs 80,000 a kg, a decline of about 33 per cent over last year. There are some private distilleries in and around Delhi, selling their stocks at lesser price, as the export of sandalwood oil is banned by the government. Besides, the Supreme Court has recently banned the use of oil in pan masala and gutkha production, which also led to a drop in its prices, the source said.
The forest department of Tamil Nadu had managed to sell about 19 tonnes at an auction about three months ago.
Both, Tamil Nadu and Kerala, conduct auctions for their stocks twice a year, while Karnataka held its e-auctions after a gap of 18 months. KS&DL has emerged as the largest buyer in all the auctions this year. The company has entered into a long-term contract with the government of Maharashtra to supply sandalwood.
Industry sources said the wood being put up on auction in Tamil Nadu and Kerala is normally dead wood or fallen trees and the level of sandalwood oil in such wood is higher and yields up to 5.5-6 per cent. Whereas, Karnataka is likely to put on auction the seized trees that are normally tender and immature, which normally yield about four per cent oil.