Why Indian sandalwood oil has no real price

Indian sandalwood occupies a singular place among natural raw materials: both protected, historically regulated by the state, especially in Karnataka, and coveted, its essential oil remains one of the most expensive in the fragrance market. India’s 2026 budget names it, for the first time, among the crops the state intends to actively promote.

Why Indian sandalwood was never an open market

Unlike most aromatic raw materials, Indian sandalwood has never been an open market. Felling trees, even on private land, remained subject to complex authorizations, a legacy of rules designed to protect a resource overexploited in the 20th century. The flip side of that protection: volumes have been chronically insufficient against demand, and a parallel market has never been fully stamped out. (A note on a common confusion: the red sandalwood regularly seized by Indian forest authorities is Pterocarpus santalinus, a different species traded for its timber, which yields no sandalwood oil at all. The tree that matters here is Santalum album.)

That scarcity shows up in price, but the number everyone quotes needs a caveat. The figure of ₹150,000 per kilogram of sandalwood oil is an administered government rate published by the Institute of Wood Science and Technology (ICFRE, Ministry of Environment, Forest and Climate Change), alongside ₹7,500/kg for class I heartwood (IWST Sandalwood Information System). It is not a traded market price, and the page carries no revision date.

The gap between the administered rate and what the market will actually pay is the real story. At a March 2026 auction of 138 tonnes from the government depot in Mysuru, ‘Chotla’ grade fetched around ₹7,000/kg in Karnataka against ₹22,823/kg in Tamil Nadu, and the Akhila Karnataka Sandalwood and Agroforestry Growers’ Association argued the Karnataka base prices “are significantly undervalued and do not comply with the Karnataka Forest Rules, 1969” (Star of Mysore). Growers, in other words, dispute the very rate the rest of the world cites as a benchmark.

Worth stating plainly, because no source we could find contradicts it: there is no public, verifiable market price for pure Santalum album oil. Trade price reports that cover the sector quote Australian Santalum spicatum (a cheaper, different species) and skip Indian sandalwood entirely. That absence is itself the point, this oil does not move through open commercial channels.

What India’s 2026 budget changes for sandalwood growers

India’s 2026 budget introduces explicit support for sandalwood cultivation, with a clear goal: encourage planting on private land rather than depending solely on public forest reserves. This direction echoes reforms already underway in some states, such as Kerala, where felling and sale rules have started to ease for private landowners who plant voluntarily.

The political intent is clear: turn a constrained resource into an incentivized agricultural sector, following the model of other perennial crops. The economic logic is simple too: a sandalwood tree planted today doesn’t reach commercial maturity for fifteen to twenty years, so every year of delay in incentivizing planting costs a generation’s worth of available volume down the line.

What sandalwood oil buyers should expect on price

For buyers of sandalwood or sandalwood essential oil, the immediate effect of this kind of measure is nil, a tree’s maturation can’t be legislated into existence. But the signal sent to the market matters: if India succeeds in broadening its production base through private land, pressure on prices could ease over the long run, and dependence on public forest stocks, more exposed to tension and trafficking, could decline.

In the short term, scarcity remains the rule, and sandalwood prices will keep reflecting that tension. But for any organization thinking about its supply on a ten- or twenty-year horizon rather than a quarterly one, this kind of reform deserves close attention, it’s redrawing the map of tomorrow’s producers, potentially beyond public channels alone. It’s the same long-horizon logic behind Firmenich’s direct sourcing relationships in the region, and a specific illustration of the climate and supply pressure reshaping fragrance sourcing strategy.

One caution on how much weight to put on this. Going back to the primary text, the Budget Speech 2026-27 delivered on February 1, 2026 devotes exactly two sentences to sandalwood: paragraph 78 lists it among “high value crops” to be supported alongside coconut, cocoa and cashew, and paragraph 81 states that the government “will partner with State Governments to promote focused cultivation and post-harvest processing.” There is no budget line, no allocation, no named scheme. It is a statement of intent, and treating it as a funded program in motion would be reading in more than the document says. Naming sandalwood alongside a small club of official “high-value crops” is still a signal to farmers, but a signal is what it is for now (Deccan Herald).