Agricultural residues have been more extensively used as alternative fuels for combustion system in boiler. This is because they are low cost and eco-friendly. Fired tube boiler with traveling grate combustor was developed and tested at steam pressure of 3 bar, in this study. Rice straw and bagasse were used as energy resources. The effects of fuel feed rate (12-17 kg/hr) and air to fuel ratio (4.6-8.0 kg(air)/kg(fuel)) on the steam production rate, combustor efficiency, heat exchanger efficiency, overall efficiency, and quantity of carbon monoxide emitted were experimentally investigated. At such ranges of fuel feed rate and air to fuel ratio, 15-20 kg/hr steam was produced with the combustor efficiency of 16.4-28.2, heat exchanger efficiency of 74.0-82.7, and overall efficiency of 14.7-22.4. An increase in fuel feed rate and air to fuel ratio resulted in the higher steam production rate, and efficiencies of combustor and heat exchanger. Overall efficiency, however, was not much affected by A/F ratio. Investigation on flue gas composition showed that contents of carbon monoxide decreased with increasing air to fuel ratio and decreasing fuel feed rate. Analysis of economic feasibility indicated that using rice straw and bagasse in place of diesel required the payback period of 1.87 and 1.89 years respectively. Rate of return for utilization of rice straw and bagasse were 57.3 and 57.5% respectively.