Financial and Economic Assessment of Biodiesel Production and Use in India

Abstract

Biofuels have been receiving increased attention of policy makers because of their ability to enhance energy security, reduce greenhouse gas emissions, and promote inclusive rural development. This paper shows that prevailing administered prices do not provide adequate incentives to produce biodiesel in India. Social cost–benefit analysis, however, shows that biodiesel production from Jatropha and Pongamia is economically viable. While explaining the reasons for failure in taking off the biodiesel sector in India, the paper argues that public sector interventions are necessary to correct existing market non-market and institutional failures that prevent development of biodiesel markets..