In today’s Finshots, we dive into how the red tape (regulation) around red sandalwood encourages illegal trade.

The Story

1.9 crore kilos (or over 19,000 tonnes)!

That’s the amount of red sandalwood (Red Sanders) illegally exported out of India between 2016 and 2020. Now, most people wouldn’t be well-versed in the subject unless they watched the popular movie Pushpa: The Rise.

It’s a fictitious story about a smuggler. But there’s nothing fictitious about the actual premise. Red Sandalwood smuggling is rampant and today we are going to talk about the economics of the illegal trade.

Red sandalwood or red sanders are a hued sandalwood species endemic to India. They are native to Andhra Pradesh and they naturally grow across 5 districts ― Chittoor, Kadapa, Kurnool, Nellore and Prakasam. Beyond the wild forests, governments and privately held plantations grow Red Sanders in the southern states of Karnataka, Tamil Nadu, Telangana and Kerala as well. But over 90% of these trees grow in plantations of Andhra Pradesh itself. So this is ground zero for smugglers.

But why do people want to smuggle this stuff?

Furniture!

Expensive furniture!

And it’s used in musical instruments in Japan. Also, Red Sandalwood has a rosy unscented heartwood that’s rich in rare earth elements such as strontium, cadmium, zinc and copper. It also has chemical molecules that add medicinal value and it has been traditionally used to treat diseases including diabetes and gastric disorders. Santalin, a natural dye that comes from red sanders also goes into making food colours, cosmetics and textiles.

These use cases partly contribute to its monetary value. But there’s more to it. There’s just not enough of this stuff going around.

Look, red sanders farming can test your patience. These gorgeous deciduous trees grow very slowly. And can take anywhere between 25 to 40 years to mature and you can only harvest them for wood afterwards. This means there’s only a limited supply of red sanders. And their population has been steadily declining over the years by about 50–80%.

Why, you ask?

Well, because of smugglers and some very confusing laws.

You see, although you can freely grow red sanders privately, you cannot harvest and sell them directly outside India. This is because it’s an endangered species and the Convention on International Trade in Endangered Species (CITES) has effectively banned the international trade of red sandalwood.

But the government can secure permission from CITES and export modest amounts of red sandalwood. Not all types. We can’t export natural red sanders, not unless it was confiscated from illegal traders. However, you can export artificially grown red sandalwood up to a certain quantum.

For instance, in December 2022 the government allowed exports of only 280 metric tonnes of artificially propagated red sandalwood. Artificially propagated meaning wood that comes from plantations. And while this may seem like a reasonable proposition, it’s not. These licenses for export are incredibly hard to come by. So farmers who legally grow these plants have little recourse. They’re often stuck with large swathes of land filled with red sandalwood trees that have no utility.

Sure they can sell it domestically. But even that can be hard sometimes since there’s a massive difference in price. In the international market, red sanders command a price of anything between ₹50 lakhs to ₹1 crore per tonne — especially in the local warehouses of Beijing, Shanghai and Guangzhou. That could mean anything upwards of ₹5,000 per kg. But domestically you’d be lucky to get half that sum.

What does that mean?

Well, growers aren’t motivated enough to sell red sanders locally. Instead, they sell it to smugglers. No permits. No hassle. No government intervention. And the smugglers? Well, they buy from plantations and cut down natural trees illegally. They have a well-oiled system in place to cut, harvest and move trees outside India. And when they are caught, the damage is very limited.

In FY22, the Press Information Bureau reported that the DRI had seized about 95 tonnes of red sanders worth over ₹150 crores in the international market. And a lot of it is sneaked out under the guise of stuff like cast iron pipes, tractor parts or household items. But compared to the actual size of the illicit trade, this is insignificant.

And that means Indian red sandalwood is exported all across the world with little deterrence. The proof lies in the fact sheet that TRAFFIC (an organisation linked to the International Union for Conservation of Nature) released a few days ago.

China was the largest taker of red sanders products importing over 13,000 tonnes, followed by Hong Kong and Singapore. Also, remember the 1.9 crore kilos of illegal red sanders exports we spoke of earlier? About 53% of it went to China.

So what do you do about it?

Well, one thing you could potentially do is make it easier for farmers to grow and export red sandalwood. This could dent demand coming in from illegal sources. And yes, you still have to curtail illegal smuggling. But that’s a problem that the government has to figure out on its own.

Until then…

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