Fragrant but expensive, sandalwood is giving Kannauj’s perfume industry a headache

Kannauj makes raw materials for the fragrance and flavour industry. But the Rs 3,000-crore cottage industry is struggling.

A worker at a perfumery in Kannauj. | Photo: Manisha Mondal/ThePrint

Kannauj: There are around 350 small, medium and large perfumeries supporting almost 50,000 families in India’s ‘perfume capital’ Kannauj, making it a Rs 3,000-crore cottage industry.

But, sky-high prices of sandalwood — its oil is a key ingredient to make attar (or itras) which are oil-based perfumes — and lack of government support to meet energy demands and find substitutes for sandalwood have seriously impacted the industry over the last decade.

Now, the pandemic hit has also hurt the industry, perfume makers say.

According to Rajendra Nath, proprietor, Lala Kedarnath Khatri Perfumers, the business isn’t even 25 per cent of what it used to be a decade ago. 

“Things have changed drastically over the past decade. Earlier there was a perfumery in almost every household. But now only the bigger players have survived and the market has become quite centralised,” said Sameer Pathak, proprietor, Munna Lal and Sons Perfumers.

Kannauj makes raw materials for the fragrance and flavour industry and largely manufactures essential oils of flowers, itras (oil-based perfumes), floral water and floral absolutes which are used by skin care, pan masala and tobacco industries.

Local traders say their biggest clients include the FMCG companies such as Procter and Gamble, Dabur, DS Group and Emami.

While most of the market is domestic, some perfumers also export to countries like Spain, China and France. The Middle East remains the biggest export market because people don’t use alcohol-based perfumes there. 

“While it’s difficult to pin the exact domestic versus export figure, I’ll say 80 per cent of the products are sold domestically while rest are exported,” said Pawan Trivedi, president of The Attar and Perfumes Association Kannauj.

Skyrocketing prices of sandalwood oil

Kannauj is particularly popular for its attars that are made on a base oil, which is usually of sandalwood.

But the lack of cultivation of sandalwood trees due to smuggling, poaching and government regulation has increased the prices of sandalwood oil exponentially.

“Currently sandalwood oil costs Rs 1 lakh a kg, and we’ve to pay 18 per cent GST on it, taking the cost to Rs 1,18,000,” said Trivedi. According to him, sandalwood oil used to cost Rs 40,000/kg in 2011-2012, which means it has risen 195 per cent over a decade.

“Go even further back in time,” said Akhilesh Pathak of Munna Lal & Sons Perfumers. “In 2002-03, the prices were Rs 5,000-6,000,” the 60-year-old said.

Pink roses being prepared for extraction of essential oils through hydro-distillation in Kannauj | Photo: Manisha Mondal | ThePrint

The reason behind the high prices is the lack of cultivation of sandalwood, which reportedly declined in India over four decades to 400 tonnes a year from 4,000 tonnes a year.

Before 2002, private cultivation of sandalwood was banned. Even today farmers can only sell it to the government.

The lack of supply of sandalwood has led to the shutting down of local sandalwood oil factories as well. Perfumers say there used to be 26 such factories within Kannauj earlier, but only two are functioning right now.

“A kg of sandalwood at Rs 1 lakh takes the price of one kg of any attar to Rs 1.5 lakh a kg. So nobody buys the attar anymore. Clientele has reduced significantly,” Trivedi said. 

As a result of lack of sandalwood oil, many attars are hardly produced anymore. “Kannauj used to produce attars of Champa, Chameli, Maulseri, Juhi, and a lot many other flowers that are hardly processed right now,” he said.

Lack of government support

Trivedi said his association of over 100 businesses has been demanding a gas pipeline for Kannauj for the past five years to meet energy demands. However, there has been no progress on this.

“It costs us extra and also harms the environment to source wood for our distilleries. A gas pipeline for Kannauj would make it easier for us but our demands aren’t paid attention to,” he said.

He also said the Fragrance and Flavour Department Centre (FFDC) set up by the Ministry of MSME in 1991 in Kannauj to help in research and development has failed them. “We want a natural substitute to our sandalwood oil needs but FFDC has so far failed us,” said Trivedi, adding that artificial substitutes like paraffin water are in use these days.

However, FFDC director Shakti Vinay Shukla said the demand for research on sandalwood alternatives was raised by the industry association “just a few months back”.

“We are working to make a project proposal for this funding. Additionally, we’ve already developed an efficient attar making unit which saves up to 48 per cent fuel,” he told ThePrint.

“We’ve also developed standards for sandalwood oil analysis by gas chromatography methods, and have also developed technology to extract odoriferous materials from sandalwood after extraction of oil,” he said.

Covid impact

The Covid-19 pandemic and the subsequent lockdown also added to the stress faced by everyone in the chain.

Mohammed Shakir, a flower farmer in Kannauj, said not only all his produce went to waste last year, this year prices are down by Rs 10 kg. “I was fetching Rs 42-45 a kg for roses last year. This year, it’s only Rs 32-35,” he said.

Sanjeev, an agent who supplies flowers and roots to the distilleries in the city from nearby farms, said his business was hurt during the lockdown and only 10-20 per cent of the distilleries were functioning, but business has now restored.

Trivedi said the business recovery post Covid has only been 50 per cent of what it was before the lockdown, and exports are still just as badly hit.

However, Pranjal Kapoor, owner of ML Ramnarain Perfumers, had a different experience. He said all the damage incurred during the Covid period has been recovered.

“During the lockdown we got passes to work and the distillery was opened. Local administration had reached the decision since complete shutdown would’ve been detrimental to the city’s economy,” he said.

“Besides during the lockdown, many small entrepreneurs in the beauty industry popped up which stabilised our sales. By June, big conglomerates also needed fresh inventory, which is when the number of orders revived again,” he said.