ITC is setting up eChoupals across the agricultural belt in India to offer the farmers of India all the information, products and services they need to enhance farm productivity, improve farm-gate price realisation and cut transaction costs. Farmers can access latest local and global information on weather, scientific farming practices as well as market prices at the village itself through this web portal – all in Hindi. Choupal also facilitates supply of high quality farm inputs as well as purchase of commodities at their doorstep. A paper describes the phased approach:
In Phase I, the business goal was to create a physical infrastructure of eChoupals at the village level and create local level ownerships through the identified Sanchalaks. At this stage the business goal was supported by creating a local language portal, which provided the required information to farmers such as local weather, market prices and best practices.
In Phase II, the business goal was to get the farmer registered and transacting by selling directly to ITC Ltd. through the virtual market. This goal was supported by creating a B2B site, which integrated the transactions directly to the back-end ERP and ensured that there was no latency in processing any of the procurement by the processing units.
In Phase III, the business goal was to create a full fledged meta-market .In this phase, the market would facilitate other operators like inputs providers and rural distributors to work effectively through the eChoupal to deliver and procure goods from every participating village.
The technology road map to support this phase was to have a secure, consolidated Farmers database with all information pertaining to their holdings and credit worthiness to be available online. This database, along with identification provided by smart cards would enable support for online transactions through the eChoupal leading to integration with participating financial institutions such as banks, insurance and credit agencies.
A more detailed description of the ecosystem being created by the eChoupals comes from a note on the World Resources Institute Digital Dividend Knowledge Bank site:
[The business model] centers around the deployment of a network of Internet-connected kiosks, known as e-Choupals, throughout agricultural areas in India. An e-Choupal is a high-tech version of the traditional “choupal,” or “village gathering place” in Hindi, where farmers are provided with the latest weather reports, local and international produce prices, and farming best practices. Costing USD 3,000 – 6,000 each to set up, they also serve as procurement and purchase points, allowing farmers not only to sell their produce to ITC, but also to buy agricultural inputs and consumer goods for daily household use.
Each e-Choupal is managed by an ITC-appointed “Sanchalak”, a respected farmer of the community who takes a public oath of office upon accepting the position. While ITC covers equipment, the day-to-day operating costs, which consist primarily of electricity and Internet connection charges, are covered by the e-Choupal Sanchalak. These costs vary depending on usage, but average about USD 60 and USD 160 per year respectively. Miscellaneous travel and equipment maintenance costs add another USD 20 in yearly fixed costs. ITC, for its part, spends an average of USD 100 annually on each kiosk, which goes toward training and infrastructure management. Such activities include maintaining a helpdesk, addressing equipment and software complaints, and repairing or replacing broken equipment.
This reorganization of the role of middlemen results in lower procurement costs for ITC, despite having to pay higher prices to the farmers. Transaction costs are also minimized for the farmer by buying output at the farmers’ doorstep, and through transparent pricing and weighing practices. A substantial quantity (120,000 MT of various commodities) has already been procured through this channel, resulting in overall savings over a million US dollars. The savings are shared between buyer (ITC) and seller (farmer). According to company officials, the average soya farmer saves US$ 5 per ton of beans when he sells through the e-Choupal network. ITC, for its part, saves US$ 4 per ton, even after paying transportation costs.
On the marketing front, ITC is able to maintain and grow the trust of its farmers by enhancing their productivity and wealth. ITC leverages this position of trust among farmers, as well as its distribution capabilities, to market its own consumer good brands and those of partner companies offering products and services that ITC does not. Sales of consumer goods through the e-Choupals have been particularly successful because the cost-savings associated with dealing directly with the manufacturer allow Sanchalaks to offer goods at lower prices than other village-level traders or retailers can afford to do.
The total network already includes 1,286 kiosks, reaching almost a million farmers across some 9,000 villages. Enthusiasm from farmers is helping ITC to rapidly scale up its network. Current plans include diversification into a wider variety of crops in 11 other states across India. Expanding at a rate of 3 to 4 kiosks a day, the company expects to have 20,000 choupals covering 100,000 villages, or one sixth of rural India, within 10 years.
Next Week: Transforming Rural India (continued)
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