Sandalwood Oil Project Report, Business Plan

Introduction to Sandalwood Oil Project Report (Chandan Oil), Extraction, and Manufacturing Business Plan: Sandalwood oil is distilled from the roots and heartwood of the sandalwood tree. It is one of the most expensive essential oils, majorly valued by perfumers because of its woody notes, giving a deep rich base note to perfumes and substitute as a natural fixative. Apart from the raw material for the production of the essential oil, wood is also used in carving, and making furniture. There is a growing demand and high cost of wood and essential oil, but for the tree takes 30 to 60 years. This resulted in illegal harvesting and disturbing the natural resource to harvest the roots and heartwood.

A guide to Sandalwood Oil Project Report (Chandan Oil), Extraction Process, and Manufacturing Business Plan in India

Sandalwood Oil Manufacturing
Sandalwood Oil Manufacturing (Image source: pixbay)

Uses of Sandalwood Oil: Sandalwood oil is famous for its antiseptic, diuretic, anti-inflammatory, antispasmodic, and cicatrisant properties. These properties are growing its use as an astringent, disinfectant, carminative, and emollient. It also acts as an expectorant, memory booster, hypotensive agent, and sedative agent. Moreover, it aids in relieving cramps, coughs, aches, and helps to impart relief to intestines and abdominal muscles, and eases the removal of gases. Also, its fragrance avoids microbes and pests away.

Business plan of Sandalwood Oil Manufacturing Business

Before starting Sandalwood Oil Manufacturing Business, you should consider the following points:

  • Market potential of SandalwoodOil
  • Presumptions and assumptions in SandalwoodOil Business
  • License, permissions and registrations required to start SandalwoodOil Manufacturing Business
  • Area or land required for starting SandalwoodOil Manufacturing Business
  • Raw materials required for SandalwoodOil Manufacturing Business
  • List of machinery required for starting SandalwoodOil Manufacturing Business
  • Manufacturing process of SandalwoodOil
  • Project economics of SandalwoodOil Manufacturing Business
  • Profit margin in SandalwoodOil Manufacturing Business

Presumptions and assumptions in Sandalwood Oil Business

  • Number of Working Days in a year: 315 Days
  • Number of shifts in a day: 1
  • Hours in a shift: 8 hours
  • Plant capacity: Consider on Average production capacities of plant.
  • Raw material availability in the fields
  • Manpower: As per the project requirement
  • Rent estimate: On the basis of current market price of the area
  • Marketing areas: Local market and households
  • If project is funded, term loan would be: 60 – 80% of total investment
  • Moratorium period:  8 – 12 months
  • Repayment Period: 8 – 9 years

Market potential of Sandalwood Oil

Because of having many of the advantages are growing the usage of sandalwood oil, which is raising the consumption potential and scope of the oil in the market. Apart from that, the increasing popularity of private-label brands is expected to endorse the development of the sandalwood oil market.

The global sandalwood oil market is projected to grow by USD 32.79 million as per reports. This marks a noteworthy market growth equated to the 2019 growth estimations because of the COVID-19 pandemic in the first half of 2020. However, steady progress is likely to continue through the forecast period, and the market is projected to grow at a CAGR of around 6%.

Below is the list of licenses, permissions, and registrations required for starting SandalwoodOil Manufacturing Business-

  • Firm registration
  • MSME registration
  • GST registration
  • ROC
  • PAN Card
  • Aadhar registration
  • Registration of firm
  • Shop Act License
  • FSSAI License
  • IEC Code
  • Export License
  • Fire and Safety
  • ESI
  • PF
  • No Objection Certificate (NOC) from pollution board
  • Trade license from the local municipal authority
  • You also need to obtain permission from Forest Department to cut the sandalwood tree

Land required for starting Sandalwood Oil Manufacturing Business

To start SandalwoodOil Manufacturing Business, you need a minimum area of 500 – 800 sq. mt. This specification is required for establishing a small-scale unit.

Raw materials required for starting Sandalwood Oil Manufacturing Business

The raw materials required to extract the SandalwoodOil are heartwood and roots of the Santalum album.  

The manufacturing process of Sandalwood Oil

East Indian Sandalwood oil is obtained from Santalum album, the popular and oldest traded type of sandalwood, for many years. Cultivation is concentrated in India particularly in the highlands of southern India and the Malayan Archipelago and the center of production as Mysore. Its natural distribution is seen till Indonesia (in specific Timor), and it has been presented into Australia and plantations have been established in the tropical north-western areas – around 8,000 ha area is estimated with annual additions of about 1,000 ha; currently, it has also been included into several Pacific Islands and plantations are getting gradually established. 

Distillation process to extract Sandalwood Oil

Before distillation, the heartwood and roots are chipped and later pulverized to obtain a coarse grind material. Oil yield differs with the plant part, the tree age, and the environment where it is grown. Roots can give around 10% oil; heartwood will give 4%. Distillation will be done in 48 to 72 hours, and efficiently ends when the yield of oil terminates to be economical. High-pressure steam distillation will provide a higher yield and reduced distillation period but will lose some of its delicate aspects.

Quality Standards to check for Sandalwood Oil

After extracting the Sandalwood Oil, you need to follow the below quality standards:

(a) East Indian Sandalwood oil: ISO 3518:2002 and NF T 75-339

  • Aspect: limpid liquid, viscous nature
  • Colour: Nearly clear to yellow
  • Odor: Heavy, sweet, and very lasting odor

Physical characteristics:

  • Density: 0.968 – 0.983 @ 20oC
  • Refractive index @ 20oC: 1.503 – 1.508
  • Optical rotation@ 20oC:  -15 to -21o
  • Solubility in 70% ethanol (v/v) at 20oC should be less than 5 volumes of 70% ethanol for 1 volume of oil

Chemical characteristics:

Ester number: max 10

The total alcohol percentage is estimated as Santalol: 90% minimum

(b) Australian Sandalwood oil: NF T 75-248

  • Aspect: limpid liquid, viscous nature
  • Colour: colorless to light yellow
  • Odour: strong lasting odour with characteristic of the wood
  • Physical characteristics:
  • Density: 0.968 – 0.978 @ 20oC
  • Refractive index @ 20oC: 1.504 – 1.510
  • Optical rotation@ 20oC: -8 to -3o
  • Solubility in 70% ethanol (v/v) at 20oC should be less than 5 volumes of 70% ethanol for 1 volume of oil

Chemical characteristics:

  • Acid number: maximum 5
  • Ester number: minimum 4.5; maximum 10
  • Ester number after acetylation: minimum 199

The total alcohol amount, calculated as Santalol not mentioned but should be 90% as a minimum percentage.

Sandalwood Oil Project Report/Economics of Sandalwood Oil Manufacturing Business in India

In case if you miss this: Mustard Oil Manufacturing Project Report.

Sandalwood Oil
Sandalwood Oil

1. Land and Building with a covered area of 500 Sq. Mtrs. On rent

2. Plant and Machinery

(a) One Disintegrator/Burster with 15 HP motor and other accessories: Rs. 1,56,000

(b) One Decorticator with 30 HP Motor and other accessories: Rs. 2,76,000

(c) One Turbo cleaner with 15 HP Motor and other accessories: Rs. 1,62,000

(d) One Screener with 2 HP Motor and other accessories: Rs. 42,000

(e) One Baling Press with 5 HP Motor and other accessories: Rs. 1,38,000

(f) Two Retting Tanks: 2.5 M x 1.M x1.5M: Rs. 18,000

Total: Rs. 7,92,000.

3. Miscellaneous Fixed Assets

(a) Electrification: Rs. 1,65,000

(b) Water Installations: Rs. 44,000

(c) Miscellaneous others: Rs. 55,000

Total: Rs. 2,64,000.

4. Provision for contingencies: Rs. 49,500

5. Preliminary and Pre-operative expenses: Rs. 60,500

Total fixed Costs: Rs. 12,00,000.

6. Working Capital:

(a) One month Raw Materials: Rs. 1,89,292

(b) One month Power cost: Rs. 17,585

(c) One month Wages and Salaries: Rs. 35,750

(d) One month’s other expenses: Rs. 54,450

Total Working Capital: Rs. 2,97,077

Total project cost: Rs.14,97,077

(Say Rs.14,97,000).

Profit in Sandalwood Oil Making Business

Annual Sales Realization: Rs. 20,00,000

Profit = Sales – Project Cost = Rs. 20,00,000 – Rs. 14,97,000

Profit per annum = Rs. 5,03,000.


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