The Union Budget 2026-27 aims to revive India’s sandalwood production by easing cultivation rules. The goal is to move the country from a net importer to a competitive exporter in the global market, though the long-term nature of the crop presents unique risks for farmers and businesses.
The Union Budget 2026-27 has introduced a significant policy shift aimed at revitalizing India’s sandalwood industry. By relaxing longstanding regulations on private cultivation, the government seeks to reverse a decades-long decline in domestic production. The strategic focus is to transform India from a net importer of sandalwood oil into a competitive global exporter, targeting a share of the growing aromatic oils market.
For nearly three decades, from 1996 to 2024, India’s dependence on external sources was evident, with the country importing over 500 tonnes of sandalwood oil. Historically, strict government control over harvest and trade limited private sector involvement, allowing countries like Australia to expand their market footprint. The new policy encourages farmers in regions like Karnataka and Maharashtra to adopt sandalwood as a climate-resilient crop, particularly through agroforestry models where it is grown alongside mangoes or legumes.
While this policy opens new economic avenues, it is important to recognize the operational realities of the sector. Sandalwood, specifically the Santalum album species, is a hemi-root parasitic plant. This means it requires specific host species to survive and thrive. Agronomists highlight that commercial success is not solely about land availability but relies heavily on scientific management. Proper pruning, nutrition, and correct selection of host trees are essential; improper pairings, such as using fast-growing trees that suppress the sandalwood canopy, can lead to high mortality rates and financial loss.
Investors looking at the agricultural or plantation sector should understand that sandalwood is a long-term timber investment. Unlike short-cycle crops, it requires patience, and liquidity is tied to the long gestation period before harvest. The sector is currently characterized by a need for specialized knowledge and careful spatial management.
Looking ahead, the success of this initiative will depend on how effectively the new guidelines are implemented at the ground level and whether they lead to a stable supply chain for aromatic oils. Key monitorables for market observers include the adoption rates among farmers, the development of specialized nurseries that can provide expert guidance on host-tree pairing, and any further updates on technical support from agricultural authorities. The shift in policy marks a major attempt to regain historical standing, but its impact on the economy will unfold over a long horizon.