Analysis of the Economic Feasibility of Production of Jatropha for Biodiesel in India

The biofuels industry has rapidly grown in the past few decades with growing concerns over climate change and global warming. In India, biofuels are being promoted with the dual goals of generating rural employment and meeting domestic energy needs, while reducing over dependence on imported oil. This thesis attempts to assess the economic feasibility of growing Jatropha as a biofuel feedstock. Using data collected from a desk review, the Net Present Value (NPV) of Jatropha production in nine states in India were calculated. Two scenarios were envisioned - one involving intercropping Jatropha with food crops and the other in which Jatropha is grown as a stand-alone crop. A sensitivity analysis was done by varying yield/ha and the cost of Jatropha seeds per kg to study their impact on the Net Present Values. The results show that intercropping improved the profitability of Jatropha in some states. The sensitivity analysis shows that yield and pricing of seeds could have significant impact on the profitability of Jatropha production. Therefore, the profitability of Jatropha could be improved by 1) intercropping with food crops or other cash crops, 2) minor improvement in yields to 1500 kg/ha - 2000 kg/ha, and 3) increasing seed prices. This thesis finds that yield increases could be achieved through provision of fertilizer and irrigation inputs, and improved seeds. To increase seed prices, a mechanism needs to be established to regularly review and update the prices at a national level in a coordinated manner. Further, in order to study the impact of increasing seed prices on the cost of biofuels, the production cost of biofuels was calculated for different seed prices. It was concluded that even if the seed prices were increased up to INR 10/kg, the cost of production of biofuels would still be lower than the current prices of petro-diesel in some states, making it competitive.