Loading velocity template inside a jar file

Final code, developed using the ideas presented in both answers above:

VelocityEngine ve = new VelocityEngine();
ve.setProperty(RuntimeConstants.RESOURCE_LOADER, "classpath");
ve.setProperty("classpath.resource.loader.class", ClasspathResourceLoader.class.getName());

ve.init();

final String templatePath = "templates/" + templateName + ".vm";
InputStream input = this.getClass().getClassLoader().getResourceAsStream(templatePath);
if (input == null) {
    throw new IOException("Template file doesn't exist");
}

InputStreamReader reader = new InputStreamReader(input);

VelocityContext context = new VelocityContext();

if (properties != null) {
    stringfyNulls(properties);
    for (Map.Entry<String, Object> property : properties.entrySet()) {
        context.put(property.getKey(), property.getValue());
    }
}

Template template = ve.getTemplate(templatePath, "UTF-8");
String outFileName = File.createTempFile("report", ".html").getAbsolutePath();
BufferedWriter writer = new BufferedWriter(new FileWriter(new File(outFileName)));

if (!ve.evaluate(context, writer, templatePath, reader)) {
    throw new Exception("Failed to convert the template into html.");
}

template.merge(context, writer);

writer.flush();
writer.close();

Unless JAR is exploded, you can't read the resource in JAR as file. Use an input stream.

See following code snippets,

    InputStream input = classLoader.getResourceAsStream(fileName);
    if (input == null) {
        throw new ConfigurationException("Template file " +
                fileName + " doesn't exist");           
    }

    InputStreamReader reader = new InputStreamReader(input);            
        Writer writer = null;

        try {
            writer = new OutputStreamWriter(output);        

            // Merge template
            if (!engine.evaluate(context, writer, fileName, reader)) 
                ......

If you want to use resources from classpath, you should use resource loader for classpath:

ve.setProperty(RuntimeConstants.RESOURCE_LOADER, "classpath"); 
ve.setProperty("classpath.resource.loader.class", ClasspathResourceLoader.class.getName());