IJMS 2016 vol.

3 (1): 59 - 69
International Journal of Multidisciplinary
Studies (IJMS)

Volume 3, Issue 1, 2016

Economic Analysis of Jatropha Bio-diesel

Production in Sri Lanka
Sivashankar P1, Weerahewa J2, Pushpakumara G3 & Galagedara L4
1
Post Graduate Institute of Agriculture
2
Department of Agricultural Economics and Business Management,
3
Department of Crop Science, Faculty of Agriculture, University of Peradeniya, Sri Lanka.
4
Grenfell Campus, Memorial University of Newfoundland, Corner Brook, NL, Canada

ABSTRACT

There has been an increasing trend in investments in renewable energy sources in the recent years. This
study assesses the economic and financial feasibility of Jatropha production in Sri Lanka under the
prevailing policy regime. The nominal protection coefficient and effective protection coefficients were
employed to gauge the level of protection for bio-diesel production using Jatropha in Sri Lanka. The cost
benefit analysis was performed to assess the feasibility of Jatropha bio-diesel production in Sri Lanka. The
conventional measures like NPV, BCR, and IRR were used in financial and economic terms. Nominal Rate of
Protection (NPR) was calculated by dividing the local Jatropha bio-diesel price by the border price of bio-
diesel. The NPR for Bio-diesel implies that nearly 47% of protection at local market level. Effective
Protection Rate (EPR) for seed production is 90%, for oil extraction and bio-diesel processing it is 128%.
Implication of this is that the producers will be protected and they receive returns 47% greater than what
they would have received under free market conditions for Jatropha cultivation. Except for the benchmark
situation, all other considered scenarios produce a favourable NPV, BCR and IRR for Jatropha bio-diesel
production. Economic benefits due to CO2 reduction were also considered in the analysis.

KEYWORDS:Cost benefit Analysis, Jatropha Biodiesel, Protection Coefficient

Corresponding author:P. Sivashankar, Email: sivashankar.p@[Link]

59
PathmanathanSivashankarJeevikaWeerahewa, GaminiPushpakumara&LakshmanGalagedara

1. INTRODUCTION ability to reclaim problematic lands and restore

eroded areas (Francis et al., 2005). Among
Oil crises in the recent years have revealed the energy crops, Jatropha has been extensively
heavy dependence of industrialized countries on practiced in developing countries of Asian,
non renewable, finite fossil energy resources. African, and Latin American continents.
This has led to immense investments on Countries in Asia and Africa have been
research and development of alternative involved in Jatropha cultivation mainly
renewable energy sources in the last two targeting the rural poor, with an expectation of
decades in many countries. Biofuel is such a alleviating poverty. Jatropha is not popular as
renewable energy source which has been an energy crop among Sri Lankans. The current
practiced and tested in many developing Jatropha ventures are at initial stages and
countries. This type of venture is limited to investments made by NGOs, and
environmentally friendly, since it reduces the private firms which receive foreign assistance.
green house gases. Emissions from burning Its feasibility as a renewable energy source has
fossil fuels are causing serious changes such as not been adequately assessed in previous
global warming and ozone depletion, which are occasions.
expected to have significant long-term effects
on the global climate. Benefits from biofuel Given this context, this study assesses
production include reduction in carbon feasibility of growing Jatropha for biodiesel
emissions, job creation, poverty alleviation, and production in Sri Lanka. Is it worth for Sri
improvement of socio-economic conditions of Lanka to produce Jatropha biodiesel? The
the rural people, especially the rural poor objectives of this study are of two folds: (a)
(Francis et al., 2005; Tomomatsu and Swallow, estimating the trade protection received by
2007; and Pushpakumara et al., 2008). Jatropha farmers during Jatropha cultivation,
Multidimensional long term benefits of biofuels Jatropha oil extraction and Biodiesel extraction
have created a growing interest in biofuel levels and (b) assessing the financial and
production in the developing countries. economic feasibility of Jatropha biodiesel
production in Sri Lanka. Answers to these
Commonest biofuel types are biodiesel and questions will support the debate, whether
bioethanol. Bio-diesel is produced from oil Jatropha biodiesel should be produced in Sri
crops like rapeseed (Brassica napus), sunflower Lanka or not and whether these farmers receive
(Helianthus annuus), Jatropha (Jatrophacurcas a trade protection from importation of substitute
L.) and soybean (Glycine max) while bio products from neighboring countries. If the
ethanol is produced from starch crops like Jatropha production is economically feasible
sugarcane, wheat and corn. Usage of food crops and farmers also receive a protection, Jatropha
in bio-diesel production is a threat to food cultivation can be initiated to produce biodiesel.
security. The current trend is bio-diesel This would have positive implications in rural
extraction from non-edible, oil-bearing trees development as well as the Macroeconomic
such as Jatropha, Pongamia, Castor and Neem parameters.
(Lele, 2008).

Jatropha is a drought tolerant plant which can 2. LITERATURE REVIEW

grow even in marginal conditions and is widely
adapted to tropical climate (Francis et al., 2005 Feasibility studies in Africa and in Indian states
and Rajagopal, 2008). Its adaptability to are more relevant to the research in question. A
marginal conditions is an advantageous feature, Kenyan based study has compared Jatropha
which other oil producing crops do not have with food crops. Study concludes that Jatropha
(Pushpakumara et al., 2008), thus it has the is only feasible as a fence crop and should not

60
 Economic Analysis of Jatropha Bio-diesel Production in Sri Lanka

be planted as a monocrop (Morra et al., 2009). seeds was not economically viable in Kenya. It
If the fixed costs are minimized Jatropha is more economical to include processing of
production will be more cost effective than the biodiesel and substituting it for kerosene with
food crops. Mogaka et al. (2010) studied the higher IRR values than just selling the seeds.
feasibility of using Jatropha as an alternative This proves that advanced biodiesel production
energy source for the rural households in the for substituting kerosene is economically viable
coastal areas of Kenya. The venture is profitable (Wekesa et al., 2009).
when the seed price is doubled and project
worthiness parameters meet the satisfactory The other crucial aspect is the policies towards
levels. biofuel production. Inter alia, trade policies on
Potential of biofuel production from Jatropha biofuels have been gaining much attention in
cultivation in wastelands and subsequent socio- the recent past due to many countries shifting
economic development in degraded lands has the momentum to produce and trade biofuels.
been reported in India (Francis et al., 2005). Both developed and developing countries have
Although large production may involve implemented comprehensive policies to
economies of scale a small decentralized system increase the share of biofuel to the national
would be beneficial since it would include other energy supply. Subsidies and other forms of tax
benefits like creating employment, making fuel rebates are among the policy decisions.
supply widely available and facilitation of Promising biofuel industries have been
redistribution of local by products. developed in west with the aegis of
comprehensive policies from the respective
Cost benefit analysis shows that rather than governments (OECD, 2006). Even though there
going up to Jatropha seed production, moving to have been some initiation to promote renewable
biodiesel production and sale of by products energy production, no special policies are
would improve the venture’s profitability. available for Jatropha cultivation and biofuel
Improvements in market co-ordination and trade in Sri Lanka.
development of value chain and enhancing the
extraction technology would further increase the The common method to study degree of
parameters in concern i.e. NPV, IRR and BCR. protection and other export import policies for
The estimated socio economic benefits of long agricultural commodities are the nominal
term Jatropha cultivation prove that the protection coefficient (NPC) and effective
multifaceted benefits and opportunities could be protection coefficients (EPC). Even though
utilized to improve rural livelihoods and rural there are ample studies focused on food crops,
area development. no study has been done on the energy crops,
especially on Jatropha. NPC of a commodity is
Beerens (2007) show that large scale centralized the ratio of its domestic price to its border price.
system for Jatropha seed processing is viable NPC does not account for input prices. The EPC
than the decentralized pressing in Tanzania. For is defined as the ratio of value added in
the same level of production, the centralized domestic prices to value added in world prices,
production gives an IRR of 61% compared to more completely, it measures the incentives to
30-40% of IRR in decentralized processing. farmers.
Jatropha has a significant positive impact in the
rural communities in Tanzania. Depending on The EPC indicates the combined effects of
the seed yield, the added value to the local policies in the tradable commodities markets.
community which consist about 9,000 This is a useful measure because input and
inhabitants ranges from US$12,750 to 54,500. output policies, such as commodity price
This is equal to 100 annual minimum wage supports and fertilizer subsidies, are usually a
rates. Pro-poor Jatropha production entirely for part of a comprehensive policy package for

61
PathmanathanSivashankarJeevikaWeerahewa, GaminiPushpakumara&LakshmanGalagedara

farmers (Conway and Bale, 1988). The EPC is 3. PROTECTION ENVIRONMENT FOR
crucial to producers since, it indicates the JATROPHA SEED PRODUCTION AND
degree of protection provided to domestic BIODIESEL PRODUCTION
production of import-competing goods. The
EPC measure has been widely used both by The degree of protection was measured using
governments to determine the level of Nominal Protection Rates (NPR) and Effective
protection to provide to domestic industries and Protection Rates (EPR).
by international organizations such as the World
Bank (Elbehri and McDougall, 1998). Socio- 𝑁𝑃𝑅 = (𝑁𝑃𝐶 − 1) × 100
economic benefits of Jatropha have been also
extensively studied by some authors (Francis et 𝑃𝑖𝑑
al., 2005). Where, 𝑁𝑃𝐶 = and
𝑃𝑖𝑤
2.1 Sri Lankan Context
𝐸𝑃𝑅 = (𝐸𝑃𝐶 − 1) × 100
Biomass (47%), hydropower (8%) and
petroleum (45%) are the main sources used for Where,
energy generation in Sri Lanka (UNESCAP, 𝑃𝑖𝑑 −∑𝑘 𝑑
𝑗=1 𝑎 𝑃𝑗
𝑖𝑗
2008). All petroleum products are imported. 𝐸𝑃𝐶𝑖 = and
Increasing amount of biomass is also 𝑃𝑖 −∑𝑗=1 𝑎 𝑃𝑗𝑤
𝑤 𝑘
𝑖𝑗
commercially grown and added. The average
import price of crude oil (cif) of an average of
US$108.59 a barrel in 2011, a 36% increase Where 𝑃𝑖𝑑 = Domestic price of output i ,
compared to the previous year (CBSL, 2011). 𝑎ij=unit of tradable input j per unit of output
Sri Lankan energy sector experienced a hit back I, 𝑃𝑗𝑑 = Domestic price of tradable input j,
when the international oil prices went up and 𝑃𝑖𝑤 = Border price of output I,
the hydro power generation dropped due to
𝑃𝑗𝑤 = Border price of tradable input j.
unfavourable weather conditions. Total oil
import bill increased by 58% to US$4.8 billion The border price is defined as the price in the
in 2011. international market converted into local
currency using an exchange rate. If the NPC >
Domestic retail prices for fuels were increased 1, domestic producers are receiving a higher
twice by Rs.24, Rs.11, and Rs.20 for petrol, price after the policy intervention, thus
diesel and kerosene respectively by the end of protected. A NPC > 1, the consumer has to pay
2011. Sri Lanka Sustainable Energy Authority higher price for the commodity in concern. If
(SLESA) is looking at renewable energy the NPC < 1 then the consumer gets a lower
sources to overcome this crisis. It expects to price and producer is discriminated. If the NPC
increase the share of renewable energy to = 1, then the level of protection is neutral. The
generate power to 10% in 2015 and 20% by end producers and consumers are facing the same
of 2020. Investments have been made to domestic prices which are equal to the border
generate solar energy and biomass energy prices they would have faced without the policy
(CBSL 2011). intervention (Tshakok, 1990). An EPC >1,
indicates positive incentive effects of
This paves the path to look at alternative energy commodity policy (subsidy) whereas an EPC <
sources without sacrificing the food security of 1, shows negative incentives (a tax on farmers).
Sri Lanka. Thus, Jatropha biodiesel can be a EPC ignores the effects of transfers in the factor
viable option and research on Jatropha biodiesel market and therefore do not reflect the full
could bring potential benefits to the society. extent of incentives to farmers.

62
 Economic Analysis of Jatropha Bio-diesel Production in Sri Lanka

The input output coefficients for Jatropha Insurance 20 % Keyser,

biodiesel production and world market prices 2006.
were obtained from the Lele (2008). Tariff rates Unloading 3,300 Rs Hemas
for the tradable inputs and world market prices Capital Internatio
for crude oil were obtained from the Central nal
Freight
bank annual report [Link] relevant tariff data
Pvt Ltd
for tradable goods were calculated using the 2010.
tariff calculator of the Sri Lanka customs. They Unloading 6 % Keyser,
include Customs Duty, Port and Airport Chemical (2006).
Development Levy (PAL 5%), Value Added Transport 50 % Fernand
Tax (VAT 12%), Excise Duty (20%), Social - Manure o, 2010.
and Responsibility Levy (SRL 1.5%), and Transport 36 % Keyser,
Nations Building Tax (NBT 1%). The data and and (2006).
data sources are depicted below in Table 1. Margin
Duties and taxes
Table 1. Data and Data Sources Fertilizer 72.36 % CBSL
Data Value Unit Source 2011, Sri
Labour 515 Rs/man day Kahawat Lanka
te Customs
Plantatio Capital 68 % CBSL
n, 2011. 2011, Sri
Fertiliser 26 Rs/kg GOSL, Lanka
2011. Customs
Manure 5,000 Rs/lorry load DOA, Chemical 53.65 % CBSL
2008. 2011, Sri
Capital 11,850 Rs Jatropha Lanka
cost World, Customs
2010. Diesel 11 % CBSL
Oil 3.9 Rs (mn) Jatropha 2011, Sri
extractor World, Lanka
2010. Customs
Other 5,924 Rs Jatropha Biodiesel 11 % CBSL
inputs World, 2011, Sri
2010. Lanka
Customs
Biodiesel 6.2 Rs (mn) Jatropha
processor World,
2010. Table 2 shows the tradable inputs used in the
Operation 233,549 Rs Jatropha process of biodiesel production and their
World, respective factor shares. The last column depicts
2010. the output of each production level.
Methanol 2.56 Rs/kg Jatropha
World, Machinery costs amounts for higher cost to
2010. produce a litre of biodiesel. Presently fertilizer
Sodium 7.68 Rs/kg Jatropha has been subsidized for all crops at the rate of
Hydroxide World, Rs. 1,200 for unmixed 50 kg fertilizer bag (i.e.
2010.
Rs 24/kg). Rs. 1,300 for
Biodiesel 82.22 Rs/l Jatropha
World, mixed fertilizer (i.e. Rs 26/kg) and for paddy it
2010. is given for Rs. 350 per 50 kg bag (Rs 7/kg).
Fossil 84 Rs/l CBSL, Thus, for Jatropha it is given at the subsidy rate
Diesel 2012. of 72.36%.

63
PathmanathanSivashankarJeevikaWeerahewa, GaminiPushpakumara&LakshmanGalagedara

3.1 Protection Coefficients Jatropha Oil 1.49 (49%) 1.85 (85%)

Extraction
Biodiesel 1.11 (11%) 1.47 (47%)
Nominal and Effective protection coefficients Production
reveal the level of protection an industry is Source: Author’s calculations, *NPR values are
receiving in the country with reference to the within parenthesis
world market conditions and they provide a
direction of the host countries policy Table 4: EPCs for different production levels
orientation. Stage Inside the Local
Border Market
Table 3 depicts the NPC values for Biodiesel Jatropha Seed 1.49 (49%) 1.90 (90%)
production at the border level and local market Jatropha Oil 1.68 (68%) 2.28(128%)
price level. NPR measures the trade protection Biodiesel 1.68 (68%) 2.28 (128%)
on output. Local producers enjoy a protection of Source: Author’s calculations, *EPR values are
86%, 85%, and 47% respectively for Seed, Oil, within parenthesis
and biodiesel production of Jatropha. This
indicates on average the barriers to seed, oil, EPC measures the degree of protection on both
and biodiesel imports of Jatropha hold the output and input. EPC has to be calculated to
domestic price at 86%, 85%, and 47% above the grab the effects of trade policies on tradable
import price and this is a positive protection to inputs. Thus, trade policies like taxes and
producers at the expense of consumers who subsidies to inputs will be also accounted in
have to pay a higher domestic price. Even inside EPC. Table 4 presents the EPC values for
the border the producers are protected at 50% different levels of biodiesel productions at the
and 11% for seed and oil, and biodiesel, border and at local market. Within the border of
respectively. Sri Lanka, seed, oil, and biodiesel, all three are
protected around 50%, 68%, and 68% above the
Table 2: Tradable goods and factor shares CIF price, respectively. For seed protection at
according to level of Jatropha production local market, input fertilizer is subsidized at
Tradable Factor Final 73% below the world market price. It derives an
EPR of 90% for seed production which implies
Activity Items Share Product
an incentive for producers. Further, Jatropha oil
Jatropha Jatropha and biodiesel is protected 128% above the CIF
Cultivation Fertiliser 0.018 Seeds price, giving a clear protection for local
Jatropha Straight
Jatropha producers. Since all the EPC values are
above unity this industry is effectively protected
Oil Jatropha
against imports. Even though, tradable inputs
Extraction Machinery 0.64 Oil are taxed, the output’s tariff rate is higher than
Machinery 1.024 the tariff on tradable inputs. Thus, effective
Biodiesel
protection for Jatropha is high.
Production KOH 0.008 Biodiesel
Methanol 0.003
Source: Author’s calculations 4. FINANCIAL AND ECONOMIC
BENEFIT COST ANALYSIS OF
Table 3: NPC and NPR Values inside the JATROPHA SEED PRODUCTION AND
border and at local market prices BIODIESEL PRODUCTION
Stage Inside the Border Local
Market Project worthiness was assessed using few key
Jatropha Seed 1.50 (50%) 1.86 (86%)
Production
indicators, viz. net present value, internal rate of
return and benefit cost ratio of the project.

64
 Economic Analysis of Jatropha Bio-diesel Production in Sri Lanka

These three are the most commonly used were estimated during the first and second year,
indicators to measure the project worthiness and respectively. In the first instance, a cost-benefit
has been used in many feasibility studies of analysis was conducted under assumed
Jatropha biodiesel production. Net present value technical production parameters. The
is computed by finding the difference between considered technical parameters are, a) 1.33
the present worth of benefit stream less the kg/plant/year, b) 30% biodiesel extraction, c) 2
present worth of cost stream. m x 2 m spacing, d) 20 years of crop lifespan, e)
10.5% discount rate, f) Rs. 120/l of biodiesel
n
Ri  Ci price, g) Full wage rate i.e. Rs. 515. Income
NPV   components were mainly biodiesel and
i 1 1  r n byproduct sales.
Where, Ri = Gross Return of the ith year , Project worthiness was assessed by estimating
Ci = Cost incurred in ith year, n = Planning NPV, IRR and BCR. At next, key variables
period were identified from the earlier CBA and they
were altered at feasible levels to conduct a
Benefit to Cost Ratio (BCR) is the ratio of sensitivity analysis. This analysis was done in
present worth of benefit stream to present worth two scenarios. At first scenario it was with fully
of cost stream. The investment is said to be hired labour and the second was with half of the
profitable when the BCR is one or greater than labour requirement replaced by family labour.
1. This method is widely used in economic Key variables chosen for the sensitivity analysis
analysis and not in private investment analysis. are, I) seed yield (1.33 and 2.00 kg/plant/year),
B / C Ratio 
 PVB II) by products (with and without scenario), and
 PVC III) hired labour versus Family labour. Finally
worthiness of the each project was assessed and
Where, PVB = Present Value Benefit, and compared with the baseline data.
PVC = Present Value Cost
Table 5 depicts the Project worth measures both
Internal Rate of Return (IRR) is the discount in terms of financial and economic analysis
rate which just makes the NPV of the cash flow terms. Since economic benefits are high due to
equal zero. It represents the average earning CDM opportunities in this project the economic
power of the money used in the project over the analysis is more feasible than financial analysis.
project life. It is also called yield of the With full wage level all the scenarios are
investment. Jatropha cultivation and biodiesel feasible except the baseline scenario. At
extraction project was considered to be benchmark level, a negative NPV is obtained
continued for 20 years. Capital equipments were with a unit BCR and 10% IRR. This level is not
depreciated at the end of each year by 5% and feasible in financial terms. In economics term,
considered no salvage value at the end of 20th the project is worth as NPV reaches LKR 18mn
year. The cost components included all the with 21% higher returns (BCR 1.21) and 16%
activities from land preparation to seed of IRR. The considered discount rate is 10.5%.
cultivation, oil extraction, and biodiesel For a 147 ha Jatropha plantation around 200
tranesterification. The cost of producing a man days of employment is generated in the
planting material (i.e. a cutting or seedling) was first year and 50 man days are generated from
assumed as Rs. 35. During the first year, 2500 the second year onwards. Thus totally 1150 man
plants were assumed to be planted per hectare days of employment is generated by this
and 500 plants were considered to be necessary project. Moreover, income generation from
for replanting. In total 100 plants were allocated CO2 reduction per year for a hectare is around
for one man-day and 25 and 5 man-days/ha LKR 4024. For the total project period the

65
PathmanathanSivashankarJeevikaWeerahewa, GaminiPushpakumara&LakshmanGalagedara

income from CO2 reduction amounts to LKR from the existing labor markets. Since other
11,829,825. The all the other scenarios show countries have also heavily protected the
that the project is worthwhile with sufficient agriculture sector it would be difficult to export
NPV, BCR and IRR. Since there are less the product. The current trend has been a
environmental damage and more environmental fluctuation of conventional diesel prices and it
benefits, those will be accounted for the benefits is being kept high due to the higher tax rate
in the economic analysis. Thus, economic being implemented. So for Jatropha biodiesel to
analysis exceeds the financial analysis. be marketable it has to be below the market
price of diesel. But the current trends in diesel
Cost benefit analysis has been used in other are that prices are declining after 2012. It will
studies related to Jatropha Biodiesel production. be difficult to produce biodiesel when diesel
However their results do not show a favourable prices are kept low.
scenario. Studies extending to economic cost
benefit analysis are scarce. Van Eijck et al.
(2012) concludesJatropha Biodiesel production Table 5: NPV, BCR, and IRR values for
incurs higher costs than conventional diesel. Jatropha Biodiesel Production
Further resource extansive cultivation yields Financial Economic
less returns due to poor resource inputs. Analysis Analysis
Another study by Van Eijck et al. (2013) finds

Biodiesel &

Biodiesel &
By Product

By Product
Biodiesel

Biodiesel
that until better varieties and techniques are
developed Jatropha biodiesel production will

only

only
only be limited to poor and disadvantaged areas.
Poor and unreliable yiled is a major problem in NP 49.33 26.66 59.3 30.84
Jatropha. Cynthia and Teong (2011), Mogaka et V mn mn mn mn
Yield/Half

al. (2012), Nevase et al. (2012) also pinpoints BC

High

wage

R 1.48 1.26 1.60 1.31

the critical issues in this Jatropha venture. They
highlight the issue that availability of data and IRR 0.19 0.16 0.20 0.17
assumptions play a major role in cost benefit NP 36.9 41.77 18.98
V mn 18 mn mn mn
Yield/Half

analysis. The reliability of the analysis depends BC

on the accurate estimations and the expected
Wage
Low

R 1.41 1.20 1.47 1.21

cash flows. Starting from accurate yield
IRR 0.18 0.15 0.19 0.15
estimations to expected environmental benefits NP 66.94 44.5 98.25
High Y/Full

all have to be accurately identified. V mn mn mn 71.7 mn

BC
wage

A similar analysis by Mogaka et al. (2012) finds R 1.79 1.53 2.72 2.25
Jatropha venture is not feasible in Kenya given IRR 0.20 0.18 0.25 0.24
the current institutional setup. In Most of the NP 24.4 -0.4
Low Y/Full

studies, the analysis is too early or the Jatropha V mn mn * 42 mn 18.5 mn

BC
plantations have just being established. Some
Wage

R 1.23 1.00 1.47 1.21

have failed to prodcue expected yield returns.
Given the reality, in this analysis, it will be IRR 0.16 0.10 0.20 0.16
Source: Author’s calculations, *benchmark scenario,
important to obtain higher yeilds and higher oil
NPV in Rs.
content in the Jatropha seed.

Since the venture is domestically protected

5. CONCLUSION
against imports farmers will not have a
competition. But the competing resource like
The findings of the present study in terms of
labor would be crucial as this will be drawn
nominal and effective protection to the

66
 Economic Analysis of Jatropha Bio-diesel Production in Sri Lanka

Jatrophabiodiesel industry conclusively From the government’s perspective, it has to

suggests that the manufacturing of biodiesel in propose a comprehensive policy package that
Sri Lanka, under the current trade regime, will would cater to both the producers and
be import substitution oriented, and the current consumers. It is crucial for the government to
additional tariffs involved makes Sri Lanka actively get involved in harnessing the
more protected against imports even though opportunities created by the introduction of
trade liberalization has occurred literally. renewable bio-energy in order to remove the
Further if the production cost is high then the adverse effects created to the stakeholders.
government will have to subsidize it. There are Improvement of technology, developing
practical limitations to produce Jatropha international and national technical and
biodiesel in par with the conventional diesel commercial information flow, development of
price at local market. Thus, it has to be used as markets and creating land availabilities are
an additional income earning crop to rural some areas government needs to pay immediate
households. If the NPC to be used as a policy attention.
structure, and there by other changes within the
market, the domestic and border prices used ACKNOWLEDGEMENT
must represent the price values of the decision
makers actually would have encountered in the Financial assistance given by National Science
real situation before and after the intervention. Foundation of Sri Lanka (RG/2009/Biofuel 002)
Production incentives introduced by the trading is acknowledged.
governments, exchange rates, and input pricing
policies are of interest to trade economist and REFERENCES
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governments, exchange rates, and input pricing Energy Technology, Eindhoven, The
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