High prices deter many from participating in first set of bidding in Karnataka, Kerala and Tamil Nadu.
The three major producers of sandalwood – Karnataka, Kerala and Tamil Nadu — are set to conduct auctions for sale of the precious wood this month. The three states together are expected to offload about 150 tonnes, valued at Rs 100 crore.
Sandalwood, considered endangered and not available in abundant quantity, is always sold through auctions by the forest departments of these states, to help the fragrance industry, soap makers, artisans and temples.
The forest department of Tamil Nadu is the first to begin this year’s auction season, on January 12 with about 100 tonnes. Kerala would be next with about 40 tonnes for sale on January 19. Karnataka, which claims to be the largest producer, is holding its e-auction on January 23 with about 10 tonnes for sale, the lowest among all the states.
While, Tamil Nadu and Kerala conduct the auctions at least twice a year, Karnataka is doing it after a gap of close to two years, due to depleting stocks with the state forest department, industry sources said. Maharashtra, which also grows sandalwood, usually sells its stock to Karnataka Soaps and Detergents Limited (KS&DL), a Karnataka government enterprise, through a buyback agreement.
Amidst rising prices of sandalwood, the Tamil Nadu and Kerala forest departments are likely to fix the base price upwards to Rs 50 lakh a tonne for root and stem. In Karnataka, the last auction price was Rs 30-40 lakh a tonne and this year the base price ranges between Rs 36 lakh and Rs 53 lakh a tonne, depending on the quality of the wood, sources said.
However, not many buyers are expected to take part in the auctions due to exorbitant prices for the commodity. KS&DL, the Karnataka government-owned soap, fragrances and oil maker; Gokul Sandal, a Chennai-based sandalwood oil maker; Lalit Fragrances, another Chennai-based fragrance maker; Cauvery Handicrafts, a Karnataka government undertaking, and some of the major temple trusts across the country are some expected to participate, sources said.
“KS&DL is the largest buyer and consumer of sandalwood in the country and we have exhausted our budget of Rs 25 crore for the current financial year. We will still participate, as we are the only company to use pure sandalwood oil as a base in bath soaps and fragrances in the public sector in the world today,” said V S Venkatesh Gowda, deputy general manager, R&D, KS&DL.
The manufacturers of fragrances and soaps are not using pure sandalwood oil, due to exorbitant prices of the wood.
In addition to the base price, they have to pay 14 per cent value-added tax and 12 per cent forest development tax when they buy at auctions, Gowda added.
Industry sources say 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 per cent to six 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 sandal oil.
“As not many buyers participate in these auctions due to very high prices, we have been asking the state forest department to allot all the wood to KS&DL at a 10 per cent rise over the previous auction rates. But, they have gone ahead with the auctions this year again. We will participate, though we have run out of our budget,” Gowda said.