A framework for profitability evaluation of agroforestry‐based biofuel value chains: An application to pongamia in India

Abstract

Biofuel production from oilseed trees in small‐scale agroforestry systems is considered as a strategy for energy security, rural development and ecosystem services provision in low‐income countries. However, the economic potential of these systems remains unclear, as profitability studies commonly ignore key methodological issues such as quantitative uncertainty analysis, full accounting for opportunity costs, and inclusion of all value chain actors. This study addresses these methodological shortcomings and develops a framework for quantifying the long‐term financial performance of agroforestry‐based biofuel value chains. The framework is applied to a case in South India, to calculate profitability of pongamia (Millettia pinnata) cultivation and processing. The results show that pongamia cultivation has limited financial potential, and is only profitable in small‐scale settings, in the middle to long term and for a subset of farmers. If biodiesel is envisaged as the end product, the value chain requires substantial fiscal and marketing support to be economically viable. For current prices, financial performance is much higher if the seed oil is marketed instead of processed to biodiesel. Increased mechanization, increased yields and optimized agroforestry set‐ups might improve financial outcomes and reduce risks for both farmers and processors. These findings are case‐specific, while the developed framework opens the door to comprehensive investigation of the financial performance of other oilseed tree species and in other regions.

Comparative financial profitability of agroforestry and cereal monocropping practices in Northwestern Ethiopia

“…NPV is positive for agroforestry practices in Brazil (Martinelli et al, 2019), and in Acacia decurrens-based agroforestry in the Fagita Lekoma district, Northwestern Ethiopia (Mekonnen et al (2021). However, Dalemans et al (2019) concluded that cultivating Pongamia (Millettia pinnata) agroforestry in southern India is pro table for only small-scale production. Hence, adopting agroforestry practices is useful for enhancing the nancial opportunities of smallholder farmers.…”

A critical review of Pongamia pinnata multiple applications: From land remediation and carbon sequestration to socioeconomic benefits

“…Abadi et al (2016) concluded that Pongamia was unlikely to become commercially viable as a biofuel feedstock in Australia, mainly due to uncertainties around yield. Dalemans et al (2019) argued that Pongamia cultivation in India had limited financial potential with biodiesel as the end-product, suggesting that it could only be profitable at a small scale unless there were efforts to optimise mechanization, yields and agroforestry set-ups. Prasad and Singh (2020) found that biodiesel production from Pongamia is an economic viable option in the Pacific Island of Vanua Levu both at a small and large scale.…”

“…However, with lower net returns mainly because during initial years, establishment of Pongamia plantations result in expenditure, without any economic return (Kaushik et al, 2016;Wani et al, 2009). However, although it is argued that the cost of establishment can potentially be met through intercropping during the gestation period of Pongamia plantations (Kaushik et al, 2016), a study evaluating the profitability of Pongamia agroforestry systems using a case study from India, suggested that it has limited financial potential and is only profitable to a sub-set of small-scale farmers in the middle to long term (Dalemans et al, 2019).…”