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Biodiesel, which is fatty acid methyl ester (FAME) is biodegradable and substantially reduces the exhaust emissions, when used in different blend ratios with petroleum diesel. It will mitigate the vulnerability and the adverse effects of use of fossil fuels. However, production cost of biodiesel is not economically competitive with fossil fuel due to higher cost of lipid feedstock. The main reason of this is the relatively high cost of the lipid feedstock, which constitutes about 70 to 85% of the overall production costs. In this study, it was aimed to produce biodiesel which meets the standard specifications of biodiesel and can also economically compete with the petroleum diesel. For this, cheap feedstocks like distilled palm fatty acids, distilled ricebran fatty acids and soybean soap stock which are the by-products of refining were used for production of biodiesel. A two step process was used for the production of FAME.The process variables for production of biodiesel were first optimized at laboratory scale and then bulk production was done at pilot scale. The produced biodiesel was characterized using various analytical techniques and then was evaluated for its performance.