Bugs and business: The insect economy

Jharkhand’s Lac Industry: From Forest Resin to Global Green Opportunity

In the forests of Jharkhand, eastern India, millions of insects are quietly at work. Clinging to palash and kusum trees, they feed on sap and secrete a resin that hardens into a brittle crust. Twice a year this crust is scraped off and sold as lac. After refinement it becomes shellac, the glossy coating on pharmaceutical pills, chocolates and violins.

Most consumers never notice it. Yet India supplies almost all of the world’s lac, and Jharkhand produces more than any other Indian state. By the logic of comparative advantage, this forest region should be thriving. Instead, Jharkhand remains among India’s poorest states. The insects prosper. The humans who cultivate them do not.

The puzzle is not biological but economic. Lac is renewable, biodegradable and in rising demand as firms seek alternatives to petrochemicals. What Jharkhand lacks is not nature but industry.

A resin with global reach

Shellac has a curious history. It once insulated electrical wires and pressed gramophone records. Today it coats tablets so drugs dissolve slowly in the body. It keeps fruit shiny in supermarkets and gives furniture a natural polish. It is prized because it is edible, non-toxic and derived from insects raised on trees without fertiliser or irrigation.

In an age of climate pledges and plastic bans, shellac is fashionable again. Multinationals want bio-based coatings. Regulators prefer materials with long safety records. Lac, accidentally, fits the bill.

India accounts for roughly 80–90% of global supply. Jharkhand is its centre of gravity. Tribal farmers manage host trees and inoculate them with broodlac, the starter culture of insects. Months later they harvest sticklac, clean it into seedlac and sell it.

In theory, one healthy tree can generate several thousand rupees per season. In practice, returns fluctuate with weather, pests and prices. Climate change has made all three more volatile. Cold waves kill larvae. Heavy rains wash colonies away. Drought weakens host trees.

Still, demand abroad keeps rising. Jharkhand’s output has stagnated. That mismatch is the story.

By the numbers

• 80–90%
  Share of global lac supply produced by India.
• 40–55%
  Estimated share of India’s lac output coming from Jharkhand.
• 6 districts
  Core lac belt: Ranchi, Gumla, Khunti, Simdega, Latehar and Palamu.
• 2 harvests per year
  Typical lac cropping cycle (rainy-season and winter crops).
• Rs. 260 per kg
  Approximate farm-gate price of seedlac (varies by season and quality).
• Rs. 500–650 per kg
  Average international selling price of refined shellac flakes.
• ~60%
  Conversion yield from seedlac to shellac flakes after processing.
• 300 tonnes/year
  Typical capacity of a medium-sized integrated processing plant.
• Rs. 3.3 crore ($400,000)
  Estimated cost of a three-block pilot programme integrating farmers, brood supply and community processing.
• Rs. 3.7 crore ($450,000)
  Approximate capital investment for a medium-scale shellac processing plant.
• 15–20%
  Potential operating margin for an efficient, export-oriented processing unit.

Stuck at the bottom

The main reason Jharkhand remains poor is not lack of production but lack of processing. Most seedlac is sold to traders and refined elsewhere into shellac flakes, pharmaceutical coatings or chemical derivatives. Each step multiplies the price. Each step moves value away from the forest.

A typical chain runs: farmer → village trader → regional aggregator → processor → exporter → international buyer. The farmer receives cash quickly but cheaply. The exporter earns margins from quality control, branding and certification.

Economists call this “low-end insertion” into global markets. Jharkhand provides a biological input but does not control industrial transformation. Cocoa farmers in Ivory Coast and coffee growers in Ethiopia once faced similar traps.

Policy has reinforced this pattern. Governments have treated lac as a tribal livelihood scheme rather than as an industry. Training programmes teach inoculation techniques but not market organisation. A few small processing units exist near Ranchi. Very few produce dewaxed or pharmaceutical-grade shellac.

Forests, in short, are seen as welfare zones, not manufacturing zones.

How shellac is made

1. Inoculation
   Farmers tie broodlac (branches carrying lac insects) onto host trees such as palash and kusum. The insects migrate and colonise new branches.
2. Secretion
   Over several months the insects feed on tree sap and secrete a resin that forms a crust around the twigs.
3. Harvesting
   Resin-coated branches (“sticklac”) are cut and collected twice a year.
4. Cleaning
   Sticklac is crushed, washed and dried to remove bark and insect residue, producing seedlac.
5. Refining
   Seedlac is heated and filtered to remove wax and impurities. The molten resin is stretched into thin sheets or flakes.
6. Grading
   Shellac is sorted by colour, purity and melting point for different industrial uses (wood polish, food glaze, pharmaceuticals).
7. Advanced processing (optional)
   Higher-value products include dewaxed shellac, bleached shellac and chemical derivatives such as aleuritic acid, used in perfumes and specialty coatings.

Nature is not enough

Lac is also risky. The insect depends on precise temperature and rainfall. Pest outbreaks are common. Quality broodlac is often scarce. Farmers bear most of this risk alone. There is no insurance for insect crops. Middlemen provide liquidity but also set prices.

Administratively, lac falls between institutions. It concerns agriculture, forestry, tribal affairs and exports. No ministry fully owns it. Responsibility diffuses and reform stalls.

Yet the ingredients for change exist. Jharkhand has dense host-tree belts, a skilled farmer base and proximity to eastern ports. What it lacks is coordination.

A modest industrial policy

Officials have begun to talk of “bioeconomy clusters”. The most credible proposal is to pilot integrated lac zones in three to five high-potential blocks. These would combine assured brood supply, farmer cooperatives, community processing centres and contracts with buyers.

The cost would be small by industrial standards: roughly Rs. 3.3 crore ($400,000) over three years for a three-block pilot. Most of the money would fund broodlac grainaries, basic processing equipment and training for several thousand farmers.

The logic is demonstration. If farmers sell graded seedlac to a nearby plant rather than to traders, their share of final prices could rise sharply. If processors can rely on stable supply, they can invest in quality upgrades and export certification.

It is industrial policy in miniature: focused, limited and measurable.

Counting the returns

Private investors are cautious but interested. A medium-scale integrated processing plant handling about 300 tonnes of seedlac a year would require roughly Rs. 3.7 crore in capital. Once stabilised, it could generate revenues near Rs. 9–10 crore annually with margins of 15–20%, depending on product mix.

The upside lies in moving up the ladder: from raw shellac to dewaxed and pharmaceutical grades, then to chemical derivatives such as aleuritic acid. Certification and branding add further value.

The downside lies in biology. Unlike sugarcane or wheat, lac cannot be planted on command. It depends on millions of insects and millions of trees. Contracts with cooperatives and inventory buffers can soften volatility but not remove it.

Impact investors like the symmetry: every tonne of shellac represents thousands of tribal households in the supply chain. Few industrial inputs are so labour-linked.

Forests as factories

There is also an environmental logic. Lac rewards farmers for keeping trees standing. It turns degraded forest land into productive assets. In theory, it aligns livelihoods with conservation.

This makes Jharkhand a test case for a fashionable idea: that forests can generate income without being destroyed. But this only works if incomes are high enough to matter. Otherwise trees will still be cut for fuel and farmland.

Climate change complicates the picture. Insect populations are sensitive to warming and erratic rainfall. Researchers warn that without adaptive strains and weather-based advisories, yields could fall further. Jharkhand’s natural advantage is not guaranteed.

A familiar choice

Jharkhand’s lac economy faces a dilemma common to resource regions: remain a raw-material supplier or build industries around its advantage.

The first path is easy. It requires little coordination and creates few political battles. The second path is harder. It needs contracts, standards, trust between farmers and factories and a state willing to think beyond welfare schemes.

India has managed such transitions before. Dairy in Gujarat and coffee in Karnataka were once fragmented smallholder sectors. Cooperatives, processing plants and branding turned them into national industries. Lac has yet to find its equivalent of Amul.

Why it matters

To outsiders, shellac is obscure. To Jharkhand, it could be a development model.

As plastic faces regulatory retreat and companies chase green credentials, demand for natural coatings will grow. Jharkhand already supplies the raw input. What it lacks is the machinery of value.

If it builds that machinery, it could show that industrialisation need not begin with mines or smokestacks. It can begin with insects and trees.

If it does not, lac will remain what it has long been: a forest curiosity feeding distant industries while the people who harvest it stay poor.

The insects will continue their quiet labour regardless. Whether Jharkhand learns to work as efficiently as they do is a political question, not a biological one.