Benefits of e-choupal

“A quiet digital revolution is reshaping the lives of farmers in remote Indian

villages.”
e-choupal delivers real-time information and customized knowledge to
farmer’s
decision making ability, securing better quality & price. The e-choupal
initiative also
creates a direct marketing channel, eliminating wasteful intermediation and
multiple
handling, thus reducing transaction cost and making logistics efficient.

Digital transformation - ITC began e-choupal with Soya grower in the

villages of M.P. e-choupal tried to change the stereotype image of farmers of
bullock cart. Farmers now log on to the site through internet kiosks to order
high quality input, get information on best farming practices, prevailing
market prices for their crops at home and abroad for the weather forecast all
in the local language. The e-choupal site is also helping the farmers discover

the best price of their quality at the village itself. The site also provides
farmers with specialized knowledge for customizing their produce to the
right
consumer segments. The new storage and handling system preserves the
identity of different varieties right through the ‘farm gate to dinner plate’
supply chain. Thus, encouraging the farmers to raise their quality standards
and attract higher price.
•
Credit and Insurance - Farmers’ low income and difficulty in accessing
credit limits the capacity to pursue opportunities within and outside the
agriculture sector. ITC e-choupal proposes the solution of this problem by
making partnership with financial institutions. e-choupal provide various
types
of loans like non-cash loans for farm inputs, loans to sanchalak (sanchalak
can better manage credit risk & have better access to farmers), direct loans
to farmers based on sanchalak recommendation, Insurance & risk
management services etc.
•
Local leadership development - ITC uses involvement of farmers in
content creation helps to easily customize the information as per the local
requirements. Participation of local farmers ensures provision of adequate
and
decipherable information to e-choupal, which can be employed into the
farming, or pricing of the produce. The increased participation in e-choupal
develops local leadership quality in farmers. The farmers get attracted
towards e-choupal due to increased profits, added services that he could get,
saving in time and the ability to use e-choupal for many transactions. e-
choupal delivers relevant technologies in the hands of the farmers, which
can
improve the economic condition of the entire village. e-choupal is one of the
very few ICT projects in India that has effectively utilized e-commerce
transactions for poverty alleviation. ICT also reduced the number of
middlemen between producers and consumers. Now, simple technology
solutions are available to create networks in rural areas, which can function
as virtual marketplaces.

Other benefits to farmers

Farmers are reimbursed for transport to the procurement hub of e-choupal.
The transaction time at the ITC hub is also much faster than mandi.
ITC has given recognition to integral partner in the supply process & not
mere asagricultural producer and thus elevating the level of respect of
farmers. Similarlyproviding shaded seating area while waiting for their
paperwork shows ITC reallycare for farmers.

Cost and revenue Stream

e-choupal has been successful. It has reduced the cost of
procurement and the cost of transit and the material
handling cost. Procurement transaction costs are reduced
from the industry standard of 8 percent (farmers incurs 3
percent and the processor incurs 5 percent) to 2 percent
(with farmer saving all his 3 percent, and the processor ITC
– saving 3 percent).
The total cost incurred on the initiatives so far has been
Rs.50 million (Rs.35 million as capital cost towards
computers and other hardware at the kiosks as well as
central servers and Rs.15 million revenue expenditure incurred towards
portal
development, people overhead etc.). But ITC has gain benefit Rs. 20 million,
which is
the equivalent of full investment on 40 percent of the Choupals (Kiosks). In
terms of
future revenue, the outflow is 52.1 million in 2001-02 which reduces to 3.90
million
in 2005-2006 and for 2006-07 is estimated as 2.70 million. Where as inflow
in 2001-
02 is 15.3 million where as 65.0 million in 2005-2006 and estimated as 85.0
million
in 2006-2007. The internal rate of return (IRR) on the project works out to
be 21.55
percent.
In the mandi system, there was a mark up of 7-8 percent on the price of
soybean
from the farm gate to the factory gate of this mark-up 2.5 percent was born
by the
farmer while 5 percent was borne by ITC with e-choupal, ITC cost are down
to 2.5
percent. In absolute terms, both the farmers and ITC save about $ 6 per
metric ton.

Other challenges are: -

•
Illiteracy about computer in rural areas as well as rural population has low
trust on electronic system.
•
Selection of an educated, intelligent, reliable and matured person as a
sanchalak.
•
Improper knowledge about rural market.
•
Vicious circle of intermediaries (Adatiya & Brokers).
•
Improper and complex user interface on e-choupal.
•
Lack of rules and regulation related to electronic choupal.
•
Mistrust about inspection, testing and weighing of produce on centres.
ITC’s example show the key role of IT in providing and maintaining by a
corporation,but used by local farmers – to bring transparency, to increase
access to information,and to catalyze rural transformation, while enabling
efficiencies and low cost
References
•
www.echoupal.com
•
Case study on 'ITC's
e-choupal &
profitable rural
transformation' by
Kuttayan,
Annamalai & Rao.
•
Case study on
'Developing a rural
e-hub' by
Bowonder, Gupta &
Singh.
•
Papers in Digital
Opportunities.

distribution that make the system profitable and sustainable . Critical factors
in the
apparent success of the venture are ITC’s extensive knowledge of
agriculture, the
effort ITC has made to retain many aspects to the existing production
system,
including retaining the integral importance of local partners. ITC e-choupal is
committed to transparency and respect and fairness towards farmers as well
as local
partners.
The author is currently working as Assistant Professor in an MBA college in
Pune (NIFEM). She is an M.Phil- University topper from DAVV, Indore, MP
and is currently pursuing her PhD on e-Governance under theguidance of
Prof. (Dr.) Pankaj Trivedi.
The ITC e-choupal has attracted global attention. Says David Upton,
professor, Harvard Business School, who flew down to Indiato write this case
study for his students, "This is a supply chain innovation that is local to India
but has broad applications to theworld. What is interesting is the social good
it brings in the wake to the small, marginal farmer."
Upton points out several issues which the company has addressed.
Firstly, it is not just tweaking around but a greater efficiency in the supply
chain. One of the problems in redesigning supply chains
is how to use different tools, thus making the various players still own the
chain. Here, the farmer and the team are involved in
painting the big picture, so there is enthusiasm and a feeling of ownership.
Further, how do you avoid a channel conflict by finding space for the middle-
men? Upton also points out that the 'roll out, fix it,
scale up' model is a new approach to strategic management. The philosophy
here is that the terrain has so many uncertainties that
gaps will exist. So, unlike in the past, where focus was on well-laid strategic
plans, here you give experimentation-based strategies
more weightage.
Says Upton: "Admitted I do not have all the answers but I will not wait for
them; instead build safety nets while I roll it out, learn
lessons and then fix it. This means you are not attached to your design and
are sensitive to lessons from the outside world."
The company's target is to eventually have 50,000 choupals to cover
200,000 Indian villages which means covering one-fifth of the
country. With this infrastructure, ITC targets Rs 2000 crore (Rs 20,000
million) by the year 2005 from its international exports.
Says Sivakumar, "Even while we set up choupals all over India, we have
offers from international organisations to replicate this in
Africa and other developing countries."
The eChoupal advantage
ITC's eChoupal project is a winner—for farmers who get better remuneration and for
the company that's assured quality inputs for its business
Imagine an illiterate farmer in a remote village in Madhya Pradesh
sitting at a desktop wired up to the WWW through a small VSAT link,
powered by a tiny power generator by the side, and surfing away to
glory downloading invaluable information about weather forecasts and
sowing trends.
Imagine farmers checking prices for soya beans at the nearest
government-run market, or even on an international commodities exchange.
“A few
V V R Babu

years ago such a scenario would have seemed outlandish but today it’s a
reality,”
says V V R Babu, CIO, ITC (eChoupal Project).
IT for the Masses
The eChoupal project covers over 35,000 villages in Madhya Pradesh, Uttar
Pradesh,
Maharashtra, Karnataka, Andhra Pradesh, Rajasthan, Haryana and
Uttaranchal
providing millions of farmers with critical information on farming. The
Choupal
services are being delivered by over 6,000 Sanchalaks and over 17,000 Upa
Sanchalaks to these remotest areas.
Multiple Benefits
Farmers can look at weather forecasts, order fertiliser and herbicide, and
consult an
agronomist by e-mail when their crops turn yellow. At some eChoupals they
can
even buy life insurance, apply for loans and also check their children’s exam
results.
While much has been written about the social benefits of ITC’s eChoupal, the
matterof the fact is that the project was conceptualised with a pure business
focus to createfarmer communities in villages to facilitate sourcing of high-
quality farm produce forthe company’s fast growing agribusiness.
Better Payment
In IT parlance, eChoupal is an intelligent blend of applications like CRM and
supply
chain management. For instance, by helping the farmer identify and control
his
inputs and farming practices, and by paying more for better quality, ITC has
been
able to preserve the source and improve the quality of produce.
The project was built using .NET. The first implementation of a Soya Choupal
tookeight months but later extensions like the Aqua Choupal for aquamarine
farmerstook between six and eight weeks.
Today eChoupal is a flexible, easy to deploy solution. ITC Infotech provided
an in-house team of 25 to 30 people in the initial stage and this gradually
came down toaround 20 people, and finally a five-member team to maintain
the project.
The portfolio of commodities sourced has been vastly expanded to include
maize,
barley, sorghum, and pulses, and the sourcing cycle is extended almost
around the
year. In the commodities market, these two factors are helping ITC create a
definite
competitive advantage.
The Problems
“Initially we thought that we would work with DoT to upgrade rural
telephone
exchanges. The department was proactive in upgrading many rural
exchanges to
electronic ones. After 15 months we found that the experience was not
satisfactory,”
explained Babu.
Power cuts in rural areas can run for eight to 10 hours. ITC even went so far
as to
provide gensets at a few locations hoping to spur DoT to doing the same. It
didn’t

work out and in 2001 ITC shifted its focus to using Ku Band VSATs. Power
remained
a problem and it was solved by using solar panels.
The EChoupal Roadmap
ITC now plans to leverage its eChoupal infrastructure to sell third-party
products,
provide rural market research services, and in the social sector, to provide
services
like health advisories and enable e-governance.
ITC eChoupal has embarked in on providing best of the class retailing and
shopping
experiences to the rural consumers by building retail shopping complexes
that
provide integrated facilities under one roof. Under the brand ‘Choupal
Sagar,’ these
shopping complexes house—a procurement centre, retail store, food court,
farmer
facility centre and healthcare clinic.
In healthcare services, a pilot project has been launched along with leading
corporate healthcare service providers, to extend reliable and quality
healthcare
services to the remotest villages. Several health camps conducted during the
pilots
are encouraging and the project is in the midst of scaling up to other
locations.
ITC eChoupal is currently piloting delivery of quality education services to
the ruralareas leveraging the physical and digital infrastructure developed
for commoditiessourcing and consumer retail services.