ITC E-Choupal: Empowering Rural India

#RESEARCH
Posted on August 7, 2011 in Research, Society

By Arpita Sharma:

INTRODUCTION:

In the contemporary India, various forces are at work to change the affect of agriculture
extension in India, hitherto perceived as a process of technology transfer [research centers to
farmers] to a process of facilitating a wide range of communication, information and advocacy
services which are demand driven, pluralistic, sustainable and decentralized. In the midst of this
change, extensionists are grappling with the question of how best to harness Information and
Communication Technologies [ICTs] to improve the quality of life for millions of farmers/ farm
families.

A silent communication revolution is sweeping across rural India where people are using new
communication technology such as mobile telephones and browsing internet for a variety of
purposes. The number of such users may be small or insignificant at the moment but the very
fact that rural people have taken up these new alternatives holds great promise for agriculture
and rural development strategies and policy planners, in fact it has been made possible by the
recent advances in the ICTs gradually expanding telecommunication infrastructure and
motivated services providers. The communication theories and strategies have also taken note of
this transformation and evolved new initiatives to harness the potential of ICts for agriculture
development. Various public sector as well as private corporation institutions have come forward
with innovation ideas and strategies. The initiation of Choupal strategies network is one of them.

The e-Choupal is one of the ICT based private agency which is provision inputs and extension
service in the field of agriculture. e-Choupal is an initiative of Indian Tobacco Corporation (ITC)
Limited (a large Multi Business Conglomerate in India) to link directly with rural farmers for
procurement of agricultural/aquaculture produce. e-Choupal was conceived to tackle the
challenge posed by the unique features of Indian agriculture characterized by fragmented farms
weak infrastructure and the involvement of numerous intermediaries. ITC’s Agri Business
Division one of India’s largest exporters of agricultural commodities has conceived e-Choupal as
a more efficient supply chain aimed at delivering value to its customers around the world on a
sustainable basis. e-Choupal also unshackles the potential of Indian farmer who has been trapped
in a vicious cycle of low risk raking ability, low investment, low productivity, weak market
orientation, low value addition. Such market led business model can enhance the competitiveness
of Indian agriculture and trigger a virtuous cycle of higher productivity, higher income and
enlarges capacity for farmers risk management larger investments and higher quality and
productivity.

CONCEPT OF E-CHOUPAL

e-Choupal is a Hindi word which means “village meeting place”. Market is meeting place where
sellers/ customers come together to do the transactions. The v is a virtual market place where
farmers can do the transaction, facilitated by an internet linked computer, directly with a
purchaser and can realize better price for their produce.

The e-Choupal is a unique web-based initiative of ITC Limited [a large multi business
conglomerate in India] offering farmers required information, products and services they need to
enhance farm productivity, improve farm-gate price realizations and cut transaction costs.
Farmers can access latest local and global information on weather, scientific farming practices as
well as market price at the village itself. The serviced are provided through this web portal
[http://www. e-Choupal.com] in different languages. It also facilities supply of high quality farm
inputs as well as purchase doorstep thereby saving them time and transportation costs. Basically,
an e-Choupal is a desktop computer with internet access, housed in a small room, costing under
three lakhs to set up and about Rs 10,000 annually to maintain. The e-Choupal also providers
daily need items manufactured by ITC.

Launched in June 2000, “e-Choupal” has already become the largest private sector initiative
among all Internet-based interventions in rural India. e-Choupal services today reach out to more
than 40 lakh farmers growing a range of crops-soyabean, Coffee, wheat, rice pulses, shrimp- in
over 40,000 villages through 6450 kiosks across 8 states [M.P., Karanataka, A.P., Maharastra,
Rajjastan, Uttarakhand and Tamil Nadu]. It has future plans to cover 100,000 villages or one
sixth of rural India, within a decade.

UNIQUE FEATURES OF E-CHOUPAL

The e-Choupal model has been specially designed to tackle the challenges posed by the unique
features of Indian agriculture, characterized by fragmented farms, weak infrastructure and the
involvement of numerous intermediaries among others. The e-Choupal also unshackles the
potential of Indian Farmers who has been trapped in a vicious cycle of low risk taking ability.

e-Choupal directly links with farmers for procurement of agriculture produce like soybeans,
wheat, coffee and Prawans. Traditionally these commodities were procured in “mandi” [major
Agricultural marketing centers in rural areas], where the middleman used to make most of the
profit. These middlemen used unscientific means to judge the quality of the product to set the
price. Difference in price for good quality and inferior quality was less and hence there was no
incentive for the farmers to invest and produce good quality output. With e-Choupal, the farmers
have a choice and the exploitative power of the middleman is neutralized.

ITC has now established computers and Internet access in rural areas across several agricultural
important regions of the country, where the farmers can directly negotiate the sale of their
produce with ITC. A personal Computer [PC] with Internet access at these centers enable the
farmers to obtain information on mandi process, good farming practices and place orders for
agricultural inputs like seeds and fertilizers. This helps farmers in improving the quality of
produce and also helps in realizing better price. Each e-Choupal is run by a sanchalak
[facilitator] who is a trained farmer or a youth of the village. The computer is linked to the
Internet via phone lines or by a VSAT connection and serves an average of 600 farmers in the
surrounding ten villages within about a 5 km radius. The sanchalak bears some operating cost but
in return earns services fee for the e-transactions done through his e-Choupal. The warehouse
hub is managed by the same traditional middle-men, now called samyojaks but with no
exploitative power due to their reorganized role.

BENEFITS OF E-CHOUPAL

The e-Choupal system gives farmers more control over their choices a higher profit margin on
their crops and access to information that improves their productivity. By providing a more
transparent process and empowering local people as key nodes in the system. ITC increases trust
and fairness. The increase efficiencies and potential for improving crop quality contributing to
making Indian agriculture more competitive. Despite difficulties from undependable phone and
electric power infrastructure and sometimes limited hours of use, the system also links farmers
and their families to the world. Some sanchalaks track future prices on the Chicago Boards of
Trade as well as local mandi prices for advising the farmers about current trends in market.
Village children have used the computers for school work, games and to obtain and print of their
academic test results. The result is a significant step towards rural development.

PRINCIPLE OF THE E-CHOUPAL

The principle of the e-Choupal is to inform, empower and complete. At the same time ITC has
also extracted value in four steps to make the model sustainable and scaleable:

1] Elimination of non-value added activities.

2] Differentiated product through identity preserved supply chains.

3] Value added products traceable to farm, practices.

4] e-market place for spot transactions and support services to future exchange.

One ITC’s managerial competence to execute a complex project and manage the costs. ITC
Limited adopted a flexible project and manage the costs. ITC Limited adopted a flexible project
management approach called “roll out, fix it and scale up” to deal with uncertainties in a
pioneering model.
ADVANTAGES OF E-CHOUPAL

e-Choupal has the advantages of their own market facilities for purchasing the farmers produce.
Geographical distances do not restrict participation in the e-Choupal. The main disadvantage of
conventional market is that information asymmetry is inherent in the market whereas e-Choupal
provides for transparent transactions. This enables the participation of smaller as well as large
farmers. Elimination of some layers of intermediaries allows for large share of profits to reach
the lower end of value chain. The main attractiveness of e-Choupal is that it can be used for
connecting large producers/ small producers and small users/large users thereby eliminating the
need for hierarchy of brokers/ middleman. Internet is used as a low transaction cost backbone for
communication. Indian market has inadequate physical, social and institutional infrastructure that
is substituted by intermediaries and they also value to the chain ion every step.

The e-Choupal model demonstrates that a large business corporation can play a major role in
recognizing rural markets and increasing the efficiency of an agricultural system, while doing so
in ways that benefit farmers and rural communities as well as shareholders. The e-Choupal
model also shows the key role of information technology provided and maintained by a
corporation, but used by local farmers-in helping bring about transparency, increased access to
information and rural transformation, critical factors in the apparent success of the venture are:

1] ITC’s extensive knowledge of agriculture.

2] The efforts ITC has made to retain many aspects of the existing production system.

3] Including maintenance of local partners are treated.

PROBLEMS BEFORE E-CHOUPAL WAS INTRODUCED:

Traditionally, these commodities were procured in “mandis” (major agricultural marketing

centers in rural areas of India), where the middleman used to make most of the profit. These
middlemen used unscientific and sometimes outright unfair means to judge the quality of the
product to set the price. Difference in price for good quality and inferior quality was less, and
hence there was no incentive for the farmers to invest and produce good quality output. With e-
Choupal, the farmers have a choice and the exploitative power of the middleman is neutralised.

ICT platform that facilitates flow of information and knowledge, and supports market
transactions on line.

1. It transmits Information (weather, prices, news),

2. It transfers Knowledge (farm management, risk management)
3. It facilitates sales of Farm Inputs (screened for quality) and
4. It offers the choice of an alternative Output-marketing channel (convenience, lower
transaction costs) to the farmer right at his doorstep
5. It is an interlocking network of partnerships (ITC + Met Dept + Universities + Input COs
+ Sanyojaks, the erstwhile Commission Agents) bringing the best-inclass in information,
knowledge and inputs.
e-Choupal is, thus, distributed transaction platform that brings together sellers, buyers along with
information and service providers. e-choupal is a model with a number of non-conventional
characteristics namely:

1. customer centric
2. capable of being used for many commodities and multiple transactions
3. easily scalable once it is verified
4. uses local talent and local people and develops local leaders
5. can be extended to local as well as global procurers
6. stimulates local entrepreneurs to extend their innovativeness
7. uses all the existing institutions and legal frameworks and
8. many others can join the market as transaction time is low.

CRITICAL SUCCESS FACTORS

The e-Choupal experience highlights that ICT platforms can provide rural connectivity and e-
commerce support. These platforms have enormous potential provided they are conceptualized
for the specific needs of the community and business. Some of the elements that helped the e-
Choupal to work successfully are discussed below:

Comprehensive knowledge of rural markets: Rural markets are both economic and social
networks and there is a strong connection between the operation of social and economic
transactions. Understanding the operations is vital before the systems are conceptualized. Use of
local population, as much as possible helped the network to get the acceptance closely.

Designing a Win-Win transaction model: The success of e-Choupal comes from the condition
in which both the farmer and the processor share the benefits coming out of the elimination of
middle men and hence due to timely information availability.

Leveraging the logistics channels: The existing logistics of the rural markets are leveraged but
they are not able to exploit the information asymmetry (unlike that in a conventional market). In
that sense e-choupal uses the local institutions but eliminates the information asymmetry that
they used previously.

Selection of Sanchalak: Both the selection of Sanchalak and the acceptance of Sanchalak by the
community are very critical for the success of e-Choupal. ITC used a trial and error method for
developing the procedure for selecting Sanchalaks. In the platform terminology Sanchalak is the
interface for maintaining the platform. For the farmer the Sanchalak is the e-Choupal. Training
and sensitizing him for the crucial role has been the main reason for the acceptance of the
Sanchalak by the farmers. Sanchalak, thus, acts as the coordinator of the knowledge community,
and a representative of farming community.

Evolving an appropriate user interface: The Technology interface used in rural areas has to be
very simple. Interface has to be tried for rural settings and only after its validation it has to be
used. Firstly, one has to understand the user pattern and secondly, it has to be tried, tested and
validated. For example, farmers do not understand the concept of insurance. e-Choupal evolved a
simple interfacing arrangement that a farmer can understand.

Bottom-up model for entrepreneurship: e-Choupal encourages enormous amount of creativity

at the local level along with local entrepreneurship stimulation. The farmer and Sanchalak are
free to use the e-choupal and develop new uses. e-Choupal unleashes the creative spirit in the
rural India.

EFFECTS OF E-CHOUPAL

ITC Limited has now established computers and Internet access in rural areas across several
agricultural regions of the country, where the farmers can directly negotiate the sale of their
produce with ITC Limited. The PCs and Internet access at these centres enable the farmers to
obtain information on mandi prices, good farming practices and place orders for agricultural
inputs like seeds and fertilizers. This helps farmers in improving the quality of produce, and also
helps in realizing a better price. Each ITC Limited kiosk having an access to Internet is run by a
sanchalak – a trained farmer. The computer housed in the sanchalak’s house is linked to the
Internet via phone lines or by a VSAT connection and serves an average of 600 farmers in the
surrounding ten villages within about a 5 km radius. The sanchalak bears some operating cost but
in return earns service fee for the e-transactions done through his e-Choupal. The warehouse hub
is managed by the same traditional middle-men, now called samyojaks, but with no exploitative
power due to the reorganised role. Indeed these middlemen make up for the lack of infrastructure
and fulfill critical jobs like cash disbursement, quantity aggregation and transportation.

Due to the eChoupal services, farmers have seen a rise in their income levels because of rise in
yields, improvement in quality of output and a fall in transaction costs. Even small farmers have
gained from the initiative. Customized and relevant knowledge is offered to the farmers despite
heterogeneous cultures, climates and scales of production. Farmers can get real-time information
despite their physical distance from the “mandis”. The system saves procurement costs for ITC
Limited. The model is quite different from the other models, as the farmers do not pay for the
information and knowledge they get from e-Choupals. The principle of the e-Choupals is to
inform, empower and compete. At the same time ITC Limited also has extracted value in four
steps to make the model sustainable and scaleable:

1. elimination of non-value added activities

2. differentiated product through identity preserved supply chains
3. value added products traceable to farm practices
4. e-market place for spot transactions and support services to futures exchange

One of the factors leading to e-Choupal’s success is ITC’s managerial expertise in executing
complex projects and managing costs. ITC Limited adopted a flexible project management
approach called “roll out, fix it, and scale up” to deal with uncertainties in a pioneering model.

There are 6,500 eChoupals today. ITC Limited plans to scale up to 20,000 eChoupals by 2012
covering 100,000 villages in 15 states, servicing 15 million farmers.
CONCLUSION:

The e-Choupal has applied information and Communication technology to the advantage of
India’s small, marginal and resource-poor farmers who have hitherto operated and transacted in
unorganized markets. Distance, social discrimination and formal regulations often keep small
and marginal and resource-poor farmers out of the market. The e-Choupal scheme initiates a
reversal in this trend and empowers the farmers by proving reliable information and access to
markets where they can get competitive prices for their produce. Besides, e-Choupal has
favorably impacted the supply-chain activities related to agriculture. Produce quality and
volumes have risen. Prices of farm inputs have declined and quality of input has risen. Prices of
farm output have risen. Small and poor farmers have been the principle beneficiaries. Their cost
of transactions has declined. Their incomes have risen. What is more significant is that, the small
marginal and resource-poor farmers have typically derived these in their locales. e-Choupal
ensures world class quality in delivering all these goods and services through several products/
services specific partnership with the larders in the respective fields in additions to ITC’s own
expertise. While the farmers benefit through enhanced farm productivity and higher farm gate
price, ITC benefits from the lower net cost of procurement [despite offering better prices to the
farmers] having eliminated costs in the supply chain that do not add value.

ABOUT THE AUTHOR:

Arpita Sharma is Doctoral Research Scholar in the Dept. of Agricultural Communication of G.

B. Pant University at Pantnagar. She obtained her M.Sc. from the same University. Her research
interests focus on Effects of Information Communication Sources on Rural Society. She has
published review papers, research papers, articles in various Mass Communication journals and
Rural Development Journals as well as Magazines. She had got the Assistance- ship during
M.Sc. and UGC-JRF Fellowship in Ph.D. She has presented papers in National and
International seminars.

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