Economics of Oil Production from Pongamia (Millettia pinnata) for Biofuel in Australia

Pongamia (Millettia pinnata) has been widely studied as a potential feedstock for biodiesel fuel, though little is known about its feasibility at a commercial level. Capital budgeting and cash flow analysis was conducted for a potential Pongamia plantation and crushing plant in Queensland, Australia. For annual seed yields ranging from 20 to 80 kg (in shell) per tree, the delivered cost of Pongamia oil was estimated to be between AUD $2.22 and AUD $0.64 per litre. The seed yield range of 20 to 80 kg per tree is roughly equivalent to between 7 and 29 t per hectare at a planting density of 357 trees per hectare. Major components of the delivered cost of (Pongamia) oil are the capital expenses of land acquisition, plantation establishment and the crushing plant construction. The major operational costs include mechanical harvesting; fertiliser; control of weed, pests and diseases; seed crushing; and freight of oil to a refinery. The cost items with the greatest volume sensitivity are the capital expenses, overheads (consisting mostly of salaries and wages of employees) and the expenses associated with harvesting and crushing operations. These costs could be significantly reduced if the seed yield could be increased. Several scenarios were tested to demonstrate the effect of seed yield and oil price on the profitability and cash flow of the Pongamia enterprise. At most plausible oil prices and seed yields, Pongamia oil is not expected to be economically viable.