Agarwood Oil: “Liquid Gold” from the North-East
Why in News?
On 11–12 August 2026, an Industry Summit on Prospects & Export of Agarwood Oil from India was held in New Delhi, organised by CHEMEXCIL in association with the Ministry of Development of North Eastern Region (MDoNER). The summit highlighted that the North-Eastern Region holds about 96.6% of India’s agarwood resource base and discussed a roadmap to strengthen value addition, market access and exports of agarwood and oud oil.
What is Agarwood Oil?
On 11–12 August 2026, an Industry Summit on Prospects & Export of Agarwood Oil from India was held in New Delhi, organised by CHEMEXCIL in association with the Ministry of Development of North Eastern Region (MDoNER). The summit highlighted that the North-Eastern Region holds about 96.6% of India’s agarwood resource base and discussed a roadmap to strengthen value addition, market access and exports of agarwood and oud oil.
What is Agarwood Oil?
- Agarwood (also called oud, gaharu, heeng) is a resinous, aromatic wood formed in certain trees of the genus Aquilaria* (mainly Aquilaria malaccensis* in India) when they are infected by specific fungi.
- Agarwood oil (oud oil) is extracted from this resin-impregnated wood through hydro-distillation.
- It is one of the most expensive natural raw materials used in:
- Perfumery (especially in the Middle East and luxury fragrance markets)
- Incense and attar
- Traditional medicine (Unani, Ayurveda, traditional Chinese medicine)
- Religious and cultural rituals.
- Often described as “liquid gold”, pure aged oud oil in India typically sells between ₹8 lakh and ₹15 lakh per litre, with premium international grades reaching several crore rupees per litre.
Recent Policy and Export Measures
- Export quota increase (2025–2027):
- The Directorate General of Foreign Trade (DGFT) has increased the annual export limits for artificially propagated agarwood and agar oil for the period 2024–25 to 2026–27:
- Agarwood chips/powder: from 25,000 kg to 1,51,080 kg.
- Agar oil: from 1,500 kg to 7,050 kg.
- Exports are permitted from states including Assam, Tripura, Manipur, Nagaland, Meghalaya, Karnataka and Kerala, with specified state-wise quotas.
- Exports require licences and certification that the material is from artificially propagated sources, verified by the State Forest Department.
- The Directorate General of Foreign Trade (DGFT) has increased the annual export limits for artificially propagated agarwood and agar oil for the period 2024–25 to 2026–27:
- Tripura’s push:
- Union Minister Jyotiraditya Scindia announced plans to raise Tripura’s agarwood industry turnover from about ₹100 crore to ₹2,000 crore, through:
- Common processing centres
- Pursuit of a Geographical Indication (GI) tag
- A sixfold increase in the export quota for agarwood oil.
- Tripura expects to export around 75,000 kg of agar chips and 1,500 kg of agar oil in the current financial year.
- Union Minister Jyotiraditya Scindia announced plans to raise Tripura’s agarwood industry turnover from about ₹100 crore to ₹2,000 crore, through:
- Agarwood Export Promotion Cell:
- Constituted in May 2026 under the Ministry of Commerce, involving CHEMEXCIL and SHEFEXCIL, to focus on export promotion, exporter facilitation and market development.
- Budget and institutional support:
- The Union Budget 2026–27 included explicit support for agarwood cultivation and processing, recognising it as a high-value agri-forestry and livelihood opportunity, especially in the North-East.
Economic and Strategic Significance
- High value, low volume: Agarwood oil’s extremely high price per unit weight makes it attractive for remote and hilly areas with limited industrial options.
- Livelihood generation: Supports small and marginal farmers, tribal communities and self-help groups in plantation, harvesting, processing and allied activities.
- Import substitution and export potential: India currently imports significant quantities of oud oil and agarwood products; domestic production can reduce imports and capture part of the global luxury fragrance market.
- North-East development: Aligns with broader strategies to promote high-value horticulture, agro-forestry and bio-resources in the North-Eastern Region.
- Cultural diplomacy: Oud is deeply embedded in West Asian and Islamic cultural practices; Indian agarwood can strengthen trade and cultural linkages with Gulf countries.
Challenges and Concerns
- Long gestation period: Trees take several years (often 5–7+ years) before they can be induced to produce resinous wood, requiring patient capital and risk management.
- Quality and standardisation: Variability in resin content, distillation methods and oil quality can affect market reputation and price realisation.
- Regulatory complexity: Strict controls under forest laws and CITES (Convention on International Trade in Endangered Species) require careful compliance to avoid illegal trade.
- Market risks: Dependence on luxury and niche markets exposes producers to global demand fluctuations and branding challenges.
- Ecological risks: Without proper regulation, there is a risk of illegal harvesting from wild trees and biodiversity loss.
