Abstract
Following the global trend, India declared its biofuel policy in which biodiesel, primarily from jatropha, would meet 20% of the diesel demand beginning with 2011–2012. To promote biofuel, Indian government has announced biodiesel purchase price as well as compulsory blending ratio. But, these measures have not worked to create large scale biodiesel production in India. With this backdrop, this paper highlights about the importance of a sound pricing policy focusing on the entire value chain of biodiesel production. The analysis is based on field level data from Chhattisgarh, the leading state in the production of jatropha. Such a sound pricing policy has to deal with the prices of feedstock, by-products and final product like biodiesel. It would also have to reflect on the business model of production of biodiesel. The simulation exercises in our model shows that the business returns from the production of biodiesel and the minimum support price (MSP) of the feedstock for biodiesel (i.e. jatropha seeds in this case) are sensitive to various parameters like seed yields, technological efficiency, by product and petro-diesel prices. An effective price policy framework has to consider all these factors to create a platform for sustainable biodiesel production in India.
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