Redesigning oilseed tree biofuel systems in India

Liquid biofuel production has been widely promoted as a rural development strategy in the South. Yet, the development of biofuel value chains faces many context-specific challenges. In this empirical study we use a labelled choice experiment to assess smallholder farmer preferences for alternative production systems, value chain organisations and market developments for a biofuel program using oilseed trees (neem (Azadirachta indica), pongamia (Millettia pinnata), mahua (Madhuca longifolia)) in Karnataka state, India. Our results demonstrate that biofuel programs can benefit from ex ante analyses to improve their design. We find that most farmers (71%) are likely to adopt biofuel trees in most scenarios, especially species with relatively high yields, low labour requirements and high oilseed prices. Nevertheless, value chain reorganization through contracting and labour provision proves to be the key lever to stimulate adoption. This calls for further research on effective contract design and implementation, and for developing alternative business models. Our results imply that next to high opportunity costs of land, also high opportunity costs of labour can be a barrier to biofuel tree adoption. If biofuel programs are to succeed, they have to move beyond the idea of smallholder biofuel production on marginal lands with surplus labour.