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 Indiažs 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 sandalwoodžs 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 yearžs 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 ringžs 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 ringžs 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).