Biodiesel from microalgae has the potential to completely replace petroleum based transport fuels withoutnegatively affecting food and other crop products. Pilot scale studies were carried out with indigenous hyper lipid producingmicroalgal isolates viz., Botryococcus sp. and Tetradesmus wisconsinensis, isolated from freshwater and marine sources ofTamil Nadu, India in an indigenously designed tubular photobioreactor. The bioreactor injected with 1% CO2 level dailyincreased the biomass by 10 times and lipid to 33% during 15 days’ growth period, which can be further trans-esterified intobiodiesel. Microalgal biomass and biodiesel production costs were calculated by considering important cost factors likecentrifugation, labor charges, carbon dioxide costs etc. The production cost was worked out as ` 34.79 for one liter ofbiodiesel. At this cost level, biodiesel production by using microalgae seems to be promising technology. The fuel propertiesestimated from biodiesel are almost on par with the fossil fuel. The benefits cost ratio was worked out to be 1.72.