An Economic Assessment along the Jatropha-based Biodiesel Value Chain in India

Posted on March 30, 2011

The Government of India had launched the National Biofuel Mission in the year 2003 as an initiative to limitthe country’s dependence on crude oil imports. An integral part of this mission is the Biodiesel Blendingprogram and Jatropha, a tree-borne biodiesel yielding crop, is the cornerstone of the program. This studyhas been specifically designed to carry out economic assessment of the upcoming jatropha-based biodieselvalue chain in the country. The study, based on primary data collected from three major jatropha growingstates, has observed that jatropha cultivation is an economically viable proposition in the long-run asindicated by favourable values of net present value, internal rate of return and benefit cost ratio.Nevertheless, initial government support till attaining break even point is crucial to sustain the interest ofthe farmers. The jatropha seed processing industry has been found to be viable if operated at sufficienteconomies of scale, which in turn is determined by the level of backward integration with the seed marketand a forward integration with biodiesel distribution channels. However, the existing biodiesel value chainin India lacks this integration and is characterized by under-developed seed markets, sub-optimal processinginfrastructure and ill-defined biodiesel distribution channels. The involvement of corporate players toparticipate in processing and distribution activities has further delayed the program to take off. The studyhas cautioned that unless proactive orientation of all the stakeholders is ensured, the program may fail tomeet its objectives, at least in the medium-term.

Shinoj, P., Raju,  S.S., Praduman Kumar,  Siwa Msangi,  Pawan Yadav, Vishal Shankar Thorat  and Chaudhary, K.R. (2010). An economic assessment along the jatropha-based biodiesel value chain in India. Agricultural Economics Research Review, Vol. 23 (Conference Number): 393-404.

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