Researchers, policy makers and civil society organizations have been discussing the potential of biofuels as partial substitutes for fossil fuels and thereby as a simultaneous solution for climate change and rural poverty. Research has highlighted the ambiguity of these claims across various dimensions and scales, focusing on ethanol-producing or oilseed crops in agricultural lands or Jatropha-type crops on common lands. We studied the agronomic and economic viability and livelihood impacts of Jatropha curcas plantations on private farms in Tamil Nadu, India. We found that Jatropha yields are much lower than expected and its cultivation is currently unviable, and even its potential viability is strongly determined by water access. On the whole, the crop impoverishes farmers, particularly the poorer and socially backward farmers. Jatropha cultivation therefore not only fails to alleviate poverty, but its aggressive and misguided promotion will generate conflict between the state and the farmers, between different socio-economic classes and even within households. The water demands of the crop can potentially exacerbate the conflicts and competition over water access in Tamil Nadu villages.