Fossil fuels are the most important energy resources and are depleting rapidly. In specific, liquid fossil fuels are projected to diminish in next three decades. Fossil fuels are also directly related to air, water pollution and land degradation. In this scenario, biofuels from renewable sources are the best alternative to reduce the dependency on fossil fuels and also help in maintenance of healthy global environment and economic sustainability. Production of biofuel from food stock, though a good alternative, is generally unacceptable and results in the competition for these resources worldwide. Biofuel production from microalgae provides a sustainable alternative along with many distinctive advantages like faster growth rate, reduction in greenhouse emissions and high lipid production. Algal oil extracted and then converted in to biodiesel through a trans-esterification process. Fatty acid methyl esters in biodiesel are synthesised from the Oil extracted from the algae that is mixed with an alcohol and an acid or a base. Methanol is used as a catalyst in favouring the trans-esterification process. In conclusion, a large scale production of biodiesel from microalgal should be considered with promising prospects compared to the traditional diesel in India and its large scale cultivation should be considered. The production can be made economical by using waste water and marginal land usage of waste land for cultivation of microalgae in India.