Report

On

DevelopingaRuralMarketehub eChoupalofITC

Submitted by
ABIR LAL SAHA
A0102215034
MBA (M&S) B-34

Submitted
To
Dr. Garima Kohli Malik
Assistant Professor
Amity Business School

Abstract
ICThaspotentialtomakesignificantinroadsinatraditionalagrarianeconomylikeIndia.Indianagrosectorhas
beenexploitingthebenefitstoICT.InnovativeICTapplicationplatformsarebeingcreatedbyprivatesectorplayers
inconjunctionwithlocalfarmers.OnesuchprivateinitiativehasbeenbyITCLtdinthestateofMadhyaPradesh.It
hashelpedthefarmersinmanyways,suchasdevelopingoflocalleadership,sharedownershipoftheassetscreated
inthisinitiative,accesstothelatestknowledgefortheagrosector,sustainableincomelevelsandskilldevelopment
forproductivityimprovement.ThisinitiativefromITC[1]hasbecomeabenchmarktodayintheICTinitiativesin
agrosector.Severalbestpracticescanbelearnedfromthisinitiative,namely:
easeofreplicabilityandscalability
customizationtomeetthespecificlocalneedsand
organizationalcommitment.
ThesuccessofechoupalhasheraldedaneweraintheIndianagrosector.Theworkneedstobecarriedforwardand
replicatedintheotheruntappedareas.Creatingbusinesschannelsthatcancreateawinwinsituationbothbusiness
andfarmingcommunityhasenormouseconomiesofscope.Onceachanneliscreateditcouldbeusedformany
productsandservicesasshowninthiscasestudy.Themainreasonsforthesuccessoftheplatformhavebeenthe
involvementoflocalfarmersandmaintenanceoftheruralITnetworkbythecorporateentity.

Internetwillextendelectronicmarketplaceandmakeittheultimategobetween,theuniversalmiddleman.

Introduction
Indiaissecondmostpopulouscountryintheworld.Majorityofitspopulationlivesinvillages&earnstheir
livelihoodthroughfarming.AgricultureisthebackboneofIndianeconomy.Itcontributesaround26%ofthetotal
GDP.65%ofIndianpopulationlivesmainlyinits600,000villages.Agricultureisthemainstayofthemajorityof
thevillagersastheyareemployedinagricultureoragriculturerelatedservices.Presenceofdiverseagroclimate
zonesandavarietyofsoilandagroclimaticconditionshavemadepossiblethecultivationofalmosteveryitem
fromcashcropstofoodgrains.Agricultureprovideslivelihoodtoabout65%ofthelaborforceandaccountsfor
8.56%ofIndia'sexports.

AfterUSA,Indiahasmaximumareaofarablelandbutproductivityperhectareisnowhereneartheworldbest.
Indiaisnotinthetoptencountriesintermsofproductivityofriceandwheat.DespitegreenrevolutionIndian
agriculturesectorhasnotbeenabletoachievetheworldlevelproductivity.Cardinalreasonsbehindthisarehighly
fragmentednatureofIndianfarmingwithcloseto33%ofarablelandheldinunitsoflessthan2hectaresperowner.
Itdoesntletfarmersenjoytheeconomiesofscaleinoperationsandmodernfarmingequipmentprovesvery
expensiveforthem.Becauseofitqualityisalsoaproblem.Thefragmentedfarmsareconstrainingtherisktaking
abilityofIndianfarmerlockinghimupintoaviciouscycleoflowrisktakingability>lowinvestment>low
productivity>weakmarketorientation>lowvalueaddition>lowmargin>lowrisktakingability.Sothereisa
needtolookforinterventionsthatcanhelpthefarmersrealizehigherlevelofincome.Thisisacasestudyofthe
developmentofaruralmarkethubusingasetofinformationcommunicationtechnologies.Thisisthelargeste
marketinitiativeundertakenbyanycorporationinIndiaandalsoithasbeenasuccessfulexperience.Manyothers
aretyingtoreplicatethis.

Rural Market e-Choupal

Input

(Registered dealer)
companies

Speed

fertilizers

practices

VLW
(Unregistered dealer)

Figure1:Conventionalvaluechain

Background
IndianfarmersrelyonDepartmentofAgricultureforvariousinputssuchasweather,modernandscientificfarming
practicesandinsurancecover.AlltheseareaccumulatedbytheVLWofDepartmentofAgriculturefromvarious
sourceslikeGovernmentUniversities,Meteorologicaldepartment,insurancecompaniesetc.Forseeds,fertilizers
etc.farmersapproachinputretailerwhosourcethemfromwholesalerswhoareindirectcontactwiththe
manufacturers.Afterharvest,farmersbringtheirproducetoMandis(regionalmarketyards)insmallmultiplelots
throughouttheyear,wherethebeansareauctionedtothetradersandagentsoftheprocessingcompaniesinanopen
outcrymethod.TheGovernment,tofacilitatefairpricediscoveryandenableaggregationofgoods,regulatesthese
marketyards.Successfulbiddersthenbagthebeans,weighthem,paycashtothefarmers,andtransportthecargoto
theprocessingunits(towhomitwouldhavebeensoldthroughabroker).Manyintermediariescarryoutthiswhole
activity,eachoneactingasaprincipalwiththenextleginthetransactionchainasshowninFig1.Butwithevery
intermediarythecostofproduceincreasestotheprocessorasintermediaryaddshisprofitmargintothecost
althoughthefarmersgetthelowestpriceandmargininthewholevaluechain.Apartfromthis,intermediariesalso
blocktheflowofmarketinformationtothefarmersandusethatinformationfortheirowngood.Herepoorfarmers
aresqueezedtothemaximumwithoutthebenefitsoftheirlaboraccruingtothembuttotheintermediaries.

InternationalBusinessDivisionofITCstartedthenewinitiativenamelyechoupal(villagemeetingplaceonan
electronicplatform).
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Rural Market e-Choupal

AboutITCInterBusiness
ITCLimitedwithanannualsaleofUS$2billionfromitsdiversifiedbusinessesisoneofIndiaslargest
corporationswithitspresenceintobacco,hotels,paperboards,foodsfashionretailingandcommodityexport.
InternationalBusinessDivision(IBD)startedin1990,adivisionofITCisengagedinexportsofarangeof
agriculturalcommodities.Itcontributesover60%ofITCGroup'stotalforeignexchangeearnings.ITCIBDhasa
focusedapproachonstrengtheningitscorecompetenciesinselectcommodities.Today,IBDcontinuestodeliver
agricommoditieslikeFeedIngredientsSoyameal,RapeseedMeal;FoodgrainsRice(Basmati&NonBasmati),
Wheat&WheatProducts,Pulses;
Coffee,BlackPepper;EdibleNutsSesameSeeds,HPSGroundnuts,&MarineproductslikeShrimpsand
Prawns.ITCIBDslargestitemforexportsissoybeanmeal(arichsourceofprotein)whichareexportedtothe
animalfeedmillsaroundtheworld,competingwithseveraltransnationaltradingcompanies,mainlyfromtheUSA,
Brazil,andArgentina.

echoupalconcept
echoupalisaHindiwordwhichmeansvillagemeetingplace.Marketisameetingplacewherevendorsand
customerscometogethertodotransactions.echoupalisavirtualmarketplacewherefarmerscantransactdirectly
withaprocessorandcanrealizebetterpricefortheirproduce.echoupalhastheadvantagesofthemarketbutspans
verylargevarietiesofvendorsandcustomers.Geographicaldistancesdonotrestrictparticipationintheechoupal.
Themaindisadvantageofconventionalmarketisthatinformationasymmetryisinherentinthemarketwherease
choupalprovidesfortransparenttransactions.Thisenablestheparticipationofsmalleraswellaslargerplayers.
Eliminationofsomelayersofintermediariesallowsforlargershareofprofitstoreachthelowerendofvaluechain.
Themainattractivenessofechoupalisthatitcanbeusedforconnectinglargeproducers/smallproducersandsmall
users/largeusers,therebyeliminatingtheneedforhierarchyofbrokers.Internetisusedasalowtransactioncost
backboneforcommunication.Physicaldeliveryofproducetotheprocessorisstilldonethroughtheexisting
intermediaries.echoupaldoesnotattempttotaleliminationofintermediaries,asintermediariesareindispensablein
economylikeIndiawhereintermediariesareaddingvaluetotheeverystepofvaluechainatalowcost.
Intermediarieshavetheexpertiseinstorage,transportation,qualityassessmentandcounterpartyriskreduction,
whicharedifficulttoreplicate.eChoupalprovidesfarmerswithallthemarketinformationandthishelpsthemto
becomemarketoriented.Inechoupalintermediariesareleveragedbuttheyaredisintermediatedfromthemarket
informationflowingtothefarmers.
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Rural Market e-Choupal

IdeaGeneration
Theideaofcreatingandleveraginganelectronicmarketplacecamefromthebrainstormingsessiondonebysenior
executivesofITCIBD.ITCbelievesinusingabusinessmodelthatdoesgoodtosocietyandhelpsinimprovingthe
standardoflivingofstakeholdersaswellasaddvaluetotheshareholderwealth.Healsobelievedthattotapthe
Indianruralmarketopportunity,andtoreachacrossawiderangeinruralIndia,theleadershavetounderstandand
unleashthepowerofthesmallscaleentrepreneurinvillagecommunities.

IdeaInitiation
Thechallengeofservicingthechangingneedsofglobalcustomers,competingwiththeaggressivetransnational
tradingbehemothsinalowmarginagricommoditybusiness,operatingfromahighcosteconomylikeIndiaand
lookingforalternativemarketsintheperiodofrecessionwerethebasicbusinessdriverbehindthenewbusiness
model.ApartfromthisITCwasincreasinglylookingtointroduceserviceelementinitsactivitiesandimprovethe
customercentricity.ServiceelementwasnevertriedincommoditybusinessinIndiabefore.ITCwasaimingto
introducenewlots,newvarieties,newpackagingandnonstandardizedordersthoughthenewmodel.
ITCisthemajorexporterofsoyabean.Itusedtobuysoyabeanmainlyfromthelocalmarkets.Thiscreatedthe
problemofpoorqualityproduce;needtohandlealargevarietyandhighcostofintermediation.Indianmarkethas
inadequatephysical,socialandinstitutionalinfrastructurethatissubstitutedbyintermediariesandtheyalsoadd
valuetothechainoneverystep.ITCwaslookingforasolutionthatdoesnteliminatetheintermediariesentirelybut
atthesametimeleveragetheirstrengths.Apartfromthis

ConceptualizationoftheProject
ITCIBDstopexecutiveshadamajorbrainstormingsession.ITCwaslookingforabusinessmodelthatiscustomer
centricbutusesexistinginfrastructure.Questionslikethefollowingwereponderedupon:
WhatsthebestcorporatebusinessmodelforruralIndia?
Doesitrequireanewbreedofleaders?
Whatarethechallengesthattheseleadersarefacing?
Willtheyhavetoworkwithinneworganizationalstructures?

Rural Market e-Choupal

Theanswerspointedtowardsanelectronicmarketwithlowtransactioncost.Therearenumerousintermediariesin
thevaluechainofthecommoditybusiness.Buttheirtotaleliminationfromthevaluechainwouldnotbeprudentfor
anybusinessmodelastheymakeupforweakinfrastructure,anddelivercriticalvalueineachlegatverylowcost.
Buttheiraggregatecostmakesthechainuncompetitive.Andmanytimes,byblockinginformationflowandmarket
signals,theyareabletoextractabnormalprofitsforthemselvesthanthevaluetheyareadding.Amoreeffective
businessmodelmustbeabletoleveragethephysicaltransmissioncapabilitiesoftheseintermediaries,yetmust
disintermediatethemfromtheflowofinformationandmarketsignals.Answertothisquestionwasfoundinvirtual
verticalintegrationinthevaluechain.
CreativeuseofinformationtechnologythrougheChoupalhavestrengthenedthebasicbusinessbyenabling
reductionofcostsinthesupplychainanddeliversuperiorproducts/servicestothecustomerslikerealtime
informationonmonsoon,prices,betterfarmingpracticeswhileithasfacilitatedtheinteractionbetweencompany
andvillagecommunity.Apartfromthis,ITalsogavetheopportunitytobuildauniquemodelofruraldistribution
onthesameplatform.

IdentifyingtheProjectGoals
Theprojectwasinitiatedwiththeobjectiveofachievingawinwinsituationforbothfarmersandthecompany.So
ontheonehandmoreprofitsandlargershareofcommodityexportswereensuredforthecompanyandontheother
handfarmersrealizedbetterpricesfortheirproduceandimprovedtheproductivityoftheirfarms.Initialgoalswere
following:
Helpsenhancefarmproductivityby
Disseminatinglatestinformationondistrictlevelweatherforecastsforshort&mediumterms
Bestpracticesinfarming(genericaswellasspecific)
Supplyofqualityinputs(seed,herbicide,fertilizer,pesticidesetc)inthevillageitself
Helpsimprovepricerealizationforfarmproduceby
Makingavailablelivedataonmarketsviz.Location/Buyerwisepricesoffered
Internationalmarketpricesofrelevantagricommodities
Historical&Uptodateinformationonsupply&demand
Expertopiniononexpectedfuturepricemovements

Rural Market e-Choupal

Helpsminimizetransactioncostsinmarketingfarmproduceby
Buyingoutputatthefarmersdoorstep
Throughtransparentpricing&weightmanagementpractices

UniqueBusinessModel:eChoupal
TheeChoupalmodelhasbeenspecificallydesignedtotacklethechallengesposedbytheuniquefeaturesofIndian
agriculture,characterizedbyfragmentedfarms,weakinfrastructureandtheinvolvementofnumerous
intermediaries,whoblockcriticalmarketinformationfrompassingtothefarmersandusethatinformationfor
gettingabigmarginforthemselves.Theintermediariescapitalizedontheeconomiesofinformationandeconomies
ofphysicalthings,whicharetiedtogetherinabundle.Duetothis,thefarmersdoesnotgettheproperpriceofits
product&theycontinuetolivebelowthepovertyline.ButeChoupalsetsthingsinorderasitsmoothenstheflow
ofinformationtothefarmersbydisintermediatingintermediariesfromthechainofinformationflowandatthe
sametimeleveragesthephysicaltransmissioncapabilitiesofthethemastheydelivercriticalvalueateverylinkfor
averylowcostinaweakinfrastructureenvironment.ThestructureofechoupalisshowninFig2.

Input companies Speed fertilizers practices

Figure2:eChoupal,anewbusinessmodel

Rural Market e-Choupal

TheprojecteChoupalisITCsuniqueclick&mortarinitiativeeChoupalisanICTplatformforcarryingouttrade
atanumberoflocations.Inthis,ITCsetsupabackupphysicalservicesupportatthevillagelevel,calledChoupal,
throughSanchalak:aleadfarmer,whoactsastheinterfacebetweencomputerandthefarmer.ITCaccumulates
informationregardingweather,modernfarmingpractices,andmarketpricesfromsourceslikeMeteorological
Department,Agriuniversities,mandis(regionalmarket)etc.,anduploadsallinformationontoeChoupalwebsite.
Allinformationiscustomizedaccordingtolocalfarmersrequirementsandprovidedintothelocallanguagethrough
computersetupbyITCinSanchalakshouse.Sanchalakaccessthisinformationandfacilitatesitsdisseminationto
farmers.Informationregardingweatherandscientificfarminghelpsfarmerstoselecttherightcropandimprovethe
productivityoftheirfarms.Availabilityofmarketinformationhelpsfarmerstobecomemarketoriented.Theyknow
whatpriceITCisquotingandthepriceprevalentinthelocalmarket,therebyhelpingbetterpricerealizationfor
farmers.IffarmerdecidestoselltoITC,Sanchalakworksastheaggregatorofsmallfarmersproducetosellthemto
ITC.Sanchalakalsoaggregatesfarmersinputpurchaseordersforvariousitemslikeseeds,pesticidesandplaces
themdirectlywiththesuppliersthroughinternetandfacilitatesupplyofhighqualityfarminputsaswellaspurchase
offarmproduceatfarmersdoorstepwiththehelpofintermediariesasshowninFig2.
ItcanbedecipheredthateChoupalhasaddedcriticalvaluetotheexistingsupplychainthroughinnovative
applicationofinformationtechnology.ITCIBDhassuccessfullyreachedthevastlyscatteredfarmingvillagesof
Indiaandfacilitatedthesmoothflowofrichinformationtothembydisintermediatingtheintermediariesinflowof
information.Powerofinformationisworkingasthecatalystoftransformationofthelifeoffarmersbyhelpingthem
togetimprovedyieldsfromtheirfarmsandbetterpricerealization.Usuallyitistoughtomaintaintheexpanding
scaleofreachandrichnessintotheproductsorservicesbuteChoupalisachievingiteasilyandwefindthatoverall
valuechainhasbeenshiftedhorizontallyonthescaleofreachandrichness.
eChoupalisanICTplatformthatfacilitatesflowofinformationandknowledge,andsupportsmarkettransactions
online.
IttransmitsInformation(weather,prices,news),
IttransfersKnowledge(farmmanagement,riskmanagement)
ItfacilitatessalesofFarmInputs(screenedforquality)and
ItoffersthechoiceofanalternativeOutputmarketingchannel(convenience,lowertransactioncosts)tothefarmer
rightathisdoorstep
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Rural Market e-Choupal

Itisaninterlockingnetworkofpartnerships(ITC+MetDept+Universities+InputCOs+Sanyojaks,theerstwhile
CommissionAgents)bringingthebestinclassininformation,knowledgeandinputs.
echoupalis,thus,distributedtransactionplatformthatbringstogethersellers,buyersalongwithinformationand
serviceproviders.echoupalisamodelwithanumberofnonconventionalcharacteristicsnamely:
customercentric
capableofbeingusedformanycommoditiesandmultipletransactions
easilyscalableonceitisverified
useslocaltalentandlocalpeopleanddevelopslocalleaders
canbeextendedtolocalaswellasglobalprocurers
stimulateslocalentrepreneurstoextendtheirinnovativeness
usesalltheexistinginstitutionsandlegalframeworksand
manyotherscanjointhemarketastransactiontimeislow.

RoleofITCIBDInTheInnovativeProcess
AnICTtransactionplatformhastobecreated,ruleshavetobesetfortransactionsandplatformhastobe
maintained.ITC,thus,actedasaplatformcreator,platformcoordinatorandplatformrulesetter.Auniquesynthesis
ofconcurrenttopdown&bottomupapproachisthehallmarkofthisplatform.Whatstartedasatopdown
approach,whenseniormanagementconceptualizedthenewmodelatstrategiclevel,soonbecameabottomup
approachwiththeoperatingteamgeneratingseveralnewideas.Havingresourcedtheprojectinitsinitialphasewith
astrongbeliefinthemodelspotentialratherthantheshorttermpayoff,theChairmanofITCcontinuously
providedtheinspirationalleadershipbychallengingassumptionsandflushingoutalternativesolutions.Thesenior
executivesofIBDbringsthoughtleadershiptotheproject,conceptualizesexperiences,refines/articulates&
communicatesthebusinessmodel/purposeconstantly,besidesextractingthevalueoutofideasgeneratedbythe
operationsteamtocontinuouslybroadenthescopeoftheproject.Whiletheoperatingteam,sweatingitoutinthe
ruralhinterlandexecutingthestrategiesandexpandingthenetworkbringsbackfieldexperiencesasinnovative
inputstobeincorporatedintothestrategies.
Theprojectissurgingaheadthroughawellcoordinatedteameffortdrivenpassionatelybyeverymember,eachone
playingtheleadershiproleatdifferentpointoftimedependingonthecontext.Literallyeachoneenergizesthe
others.

Rural Market e-Choupal

EvolutionoftheICTPlatform
Theechoupalevolvedslowlyasatransactionplatformandthroughlearningitcontinuouslyevolved.Knowledge
managementwasoneofthecrucialelementsofechoupalinwhichoperations,conceptsfromotherlocationswere
continuouslyfedintothesystem.Theproblemsencounteredwhilesettingupandmanagingtheseechoupalsare
primarilyofinfrastructureinadequacies,includingpowersupply,telecomconnectivityandbandwidth.Several
alternativeandinnovativesolutionssomeofthemexpensive
arebeingdeployedtoovercomethesechallengesoflacktelecomandelectricityconnectivityinthevillagese.g.
PowerbackupthroughbatterieschargedbySolarpanels,upgradingBSNLexchangeswithRNSkits,installationof
VSATequipment,MobileChoupals,localcachingofstaticcontentonwebsitetostreaminthedynamiccontent
moreefficiently,24x7helpdesketc.apartfromtechnologicalinadequaciesabigchallengewastoimpartskillstothe
firsttimeinternetusersinremoteandinaccessibleareasofruralIndia.
Creatingalocallanguageportal,whichprovidedtherequiredinformationtofarmerssuchaslocalweather,market
pricesandbestpractices,wasthemajortask.Contentcreationwasalsoamajorelementofthemodel.Thisgoalwas
supportedbycreatingaB2Bsite,whichintegratedthetransactionsdirectlytothebackendERPandensuredthat
therewasnolatencyinprocessinganyoftheprocurementbytheprocessingunits.Akeychallengeatthisstagewas
personalizationofcontentforthefragmentedandheterogeneousfarmergroups.
Attheoperationallevelthetechnologyandoperationalprotocolsevolved.Onethingthattheprojecthaslearntinthe
beginningitselfisthattherearenoofftheshelftechnologysolutionsfordeploymentinruralIndia.Stateoftheart
technologyrequireslocalizationtoovercomethechallengesofpoorinfrastructureandthedigitaldividethatexists
inruralIndia.Accordingly,thefollowinginnovationsintechnologywasenvisagedandthesebecamethemajor
elementsoftheICTplatform:namely

Managingthevagariesoflocalpoweravailability,moreofnonavailability,throughUPSandrenewablepower
sources
Userinterfacesinthelocallanguage,andasfaraspossibleareiconicandintuitivetosupportfirsttimecomputer
users.

Rural Market e-Choupal

ConnectingtheLastMile,astheInternetistheprimarybackboneofechoupaloperatedthroughlocalpublic
telecominfrastructureorVSAT/Wirelessconnectivitysolutionsand
Smartcardtechnologytouniquelyidentifyachoupaluserandofferpersonalizedcontentdeliverybasedonthe
preferencesoftheuser.

Thechallengewastocustomizeeachofthese,sincewhereskillsetsarelimitedandservicefacilitiesarepoor.By
carefulplanningtheyhavebeenabletoconvertechoupalintoaEhubthatcouldbeusedformanycommodities
andmanyinputs.echoupalisanexpandingplatformthatincreasesitsscopeasitoperates.Ehubfacilitatesother
operatorslikeinputsprovidersandruraldistributorstoworkeffectivelythroughtheechoupaltodeliverand
procuregoodsfromeveryparticipatingvillage.Thiswillbesupportedbydirectfeedsintoruralproducebuyersand
ruralproducedistributors,integrationwiththeirERPs/backendsystemsandaliveMetamarketwithnoinherent
inefficiencies[2].Thetechnologyroadmaptosupportthisphasewillbetohaveasecure,consolidatedfarmers
databasewithallinformationpertainingtotheirholdingsandcreditworthinesstobeavailableonline.This
database,alongwithidentificationprovidedbysmartcardswillenablesupportforonlinetransactionsthroughthe
echoupalleadingtointegrationwithparticipatingfinancialinstitutionssuchasbanks,insuranceandcredit
agenciestosupportthefarmertransactionwithprocurersanddistributors.
Initiallyechoupalcameup,asanexperimentalbusinessmodelassuchmodelhadnotbeenimplementedbeforein
Indiabyanyone.Soitwasimperativethatcompanyitselfcreatedknowledgeabouttheruralmarketandtried
variousthings.Theimplementationischaracterizedbyrationalexperimentation,internallycalledRollOut,FixIt
andScaleUp.Suchanapproachwasadoptedbecausemanylessonscanbelearntonlybyimplementation,since
therearenoprecedentsandtextbooks.Asenvisagedtheplatformallowedscalabilityanddistributedoperation[3].
IthadrolledoutechoupalindifferentstateslikeMadhyaPradesh,AndhraPradesh,KarnatakaandUttarPradesh
andindifferentcommoditieslikesoyabean,wheat,coffee,aquacultureetc.ITCfirstlylaunchesechoupalatthe
pilotstageinastate,thisamountsto50to100echoupals.Ifpilotstageissuccessful,companyaimsforcritical
massscale300echoupals.Saturationstageconsistsofmorethan1500echoupals.Theechoupalsforvarious
commoditiesareindifferentstageofoperationasshowninTable1.

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Rural Market e-Choupal

Table1:Stagesinproductlifecyclestages
Commodity
Stage

Soyabean
Saturationstage

Coffee&aquaculture
Pilotstage

Wheat
Criticalmassstage

Theechoupalsforeachcommodityisconceptualizedtomeetthespecificoperationalrequirementofthatbusiness.

UsersofthePlatformandtheBenefitsDerived
Thenewtechnologyinitiativeprimarilymeantchangesininterpersonaldynamicsatanextendedorganizationlevel,
viz.
Greaterinterfacewithfarmers,needingskillstobeculturallysensitive,andopentogenerateideasfromtheroutine
dailyinteractionswithSanchalakandvillagersandcollaborativeeffortacrossorganizationsaswellaswithinthe
enterprisevsthetraditionalcompetitiveapproach.
Employeerequiredunderstandingvillagersandtheiractivities.Employeehadtobeconversantwithvillagers'
languagesoastofacilitateeasycommunicationandunderstandingoftheirproblems.Employeemusthavethe
commitmenttoworkinmostfarflungareastoachievetheobjectiveoftheproject.
Hierarchicalandtraditionalmanagementtechniqueshadtobeunlearnedandthemanagershadtoadoptawholenew
wayofcreatingdistributedleadershipintheorganization.Itwasessentialthataclosecollaborationandcooperation
bedevelopedbetweenemployeeworkinginthehinterlandandSanchalak.ForitITChavebeenconductingaseries
ofemployee&Sanchalakfocusedprograms/eventstodevelopthesenewskillssets:

farmerrelationshipmanagementworkshopsforfieldteams

outboundtrainingprogramforseniormanagementteamincludingleadershipstyleinventoryworkshopfor
improvingcollaborativemanagementskills
strategyworkshopsforcommunicatingpurposeandgeneratingideascontinuously
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Rural Market e-Choupal

trainingprogramsforqualitytestingandentrepreneurialdevelopmentofthesanchalaksand
creatingtrustamongthecontributingfarmersasitistheonlyaspectthatcanfacilitatesustainableworking
relationships.
ITCIBDsetupManthan,EnterpriseKnowledgePortalasthecentralrepositoryofknowledge,facilitating
knowledgesharing&learning.Astructuralchangewasdonetoenableandfostertheintegratedinterdependencefor
frontlineentrepreneurshipandcrossunitlearning.Freestandingandselfsufficientproductgroups(silos)morphed
intointerdependentcollaborativeunitsofspecialization(named,OperationsResourceClusters).Asystemis
evolvedthatenforcescollaborationonitsownbyrequiringeachgrouptocooperateandshareinordertoachieveits
owninterests.Thenewenterprisearchitecture,nowgettingshaped,broughthomecertainrequirementssuchas,
specializationinsharedcollaboration,andcollectiveproblemsolvingwithindividualaccountabilitiesfor
implementation.Teamdynamics,interpersonalissues,organizationalbeliefsandindividualanxietiesfundamental
totheruralmarketsettingwereaddressedbytheseniormanagementteamwithcontinuousrecognition,
communicationandcounseling.Therearecertainminimumcompetencesthatisneededforoperatingtheplatform
andthesuccesswillcomefromtheabilityofITCtodeveloptheskillsquicklyandthishelpedinmakingthe
platformoperationalinashorttime.Thespiritbehindthisskillacquisitionwasthetotalcommitmentonthepartof
ITCstaff[4].

LocalLeadershipDevelopment
eChoupal'sobjectivewastobeachievedthroughtheapplicationoftechnology,soInternetwasusedasmain
componentforimplementationofproject.Butthebiggestbottleneckwasthelackoftelecomconnectivityinrural
areasandilliteracyofthebeneficiaries.EvenifthefirstproblemissolvedthroughsettingupVSATconnectionthe
secondproblemwillstillpersist.Itwasimpracticalandunrealistictothinkthatfarmerswouldbeabletobrowsethe
netandmakeuseoffacilitiesprovidedbytheechoupal.Soitwasimperativethatechoupalsetupitsownhubinto
villageswiththeirrepresentative,calledSanchalak,handlingalltheactivitiesandworkingasanintermediary
betweenITCandfarmers.
ForbuildingtrustamongthefarmerstowardstheactivitiesofITCitwasessentialtheinterfacebetweenfarmersand
companyisfromthevillagecommunityitselfandnotsomebodyfromoutside.Infuture,whencompetitorsofITC
alsousethismodelITCsuccesswoulddependontrustandsenseofbelongingiscultivatedintothevillagers
towardsITCwiththeassistanceofSanchalak.Sanchalakisidentifiedfromwithinthe
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Rural Market e-Choupal

village.Sanchalakwasselectedonthebasisoftheireducation,age,familysize,caste,politicallineageandother
affiliation.Sanchalakismadetotakeapublicoathinwhichheswearstoperformhisjobwithoutanybiaswithfull
honestyandcommitment.Itmakeshimfeelresponsibletowardshispersonaldeedsandvillagecommunity.
Sanchalakencouragesfarmerstobecomethememberofechoupalbyexplainingtothefarmersvariousbenefits,e
choupalcanprovide.ITCemployeesareconstantlyavailabletohisassistanceduringthistime[5].
AnInternetkioskisestablishedinthehouseofSanchalak.ITCemployeesimpartoperationalknowledgeof
computerandInternettohimsothathecanperformhistaskefficientlyandeffectively.Sanchalaksurfsthewebsite
ofechoupalandprovidesthefarmerswithlatestweatherforecast,marketpricesandproductivityenhancingadvice.
SanchalakworksastheaggregatorfortheproduceofsmallfarmerswhichistobesoldtoITCandalsoaggregates
theinputordersoffarmerstobedirectlyplacedwiththemanufacturers.Inreturn,Sanchalakhasatransactionbased
incomestream(inputs&output).SomeoftheSanchalaksaremakingclosetoRs.100,000asincomefromsolely
theirechoupaloperations.ThebestSanchalaksarealsoawardsgiveninthemeetingofSachalaks.Thisencourages
otherSanchalakstoworkefficientlyandcommitted.ThedeliverymechanismofeChoupal,inadditiontobeinga
lowcostoption,isalsoeffectivebecausethesanchalakisfromwithinthecommunity,andmotivationbecomes
intrinsicbecauseofthisinternalization.ThemostcriticalaspecthereistheselectionandacceptanceofSanchalak.
ITCusedatransparentmechanismanditisdrivenonperformancecriteriaandpublictestimony.

EncouragingLocalParticipation
Themarketledbusinessenhancesthecompetitivenessandtriggersavirtuouscycleofhigherproductivity,higher
incomes,enlargedcapacityforfarmerriskmanagement,largerinvestmentsandhigherqualityandproductivity.This
isthereverseofviciouscycleoperatinginIndianagriculture.Further,agrowthinruralincomeswillalsounleash
thelatentdemandforindustrialgoods,whicharenecessaryforthecontinuedgrowthoftheIndianeconomy.This
willcreateanothervirtuouscyclepropellingtheeconomyintoahighergrowth.Forrealizationofthesegoalsitis
essentialthattheparticipationofruralcommunitybeensured.
ITCusesinputsfromfarmerstocreatethecontentforwebsite.Involvementoffarmersincontentcreationhelpsto
easilycustomizetheinformationasperthelocalrequirements[6].FarmersatITCdothefocusgroupdiscussionto
identifytheinformationrequiredbythefarmersinvillage.Layoutofwebsite,languageof
13

Rural Market e-Choupal

information,contentsallaredecidedontheadviseofthefarmers.Participationoflocalfarmersensuresprovisionof
adequateanddecipherableinformationtoechoupal,whichcanbeemployedintothefarming,orpricingofthe
produce.Theincreasedparticipationinechoupalhasbeenduetothecreationofwinwinsituationinwhichboththe
firmandthefarmerbenefitsequally.Thefarmergetsattractedtowardsechoupalduetoincreasedprofits,added
servicesthathecouldget,savingintime,andtheabilitytousetheechoupalformanytransactions.
echoupaloperationhasbeensuccessful.Ithasreducedthecostofprocurementandthecostoftransitandthe
materialhandlingcost.Procurementtransactioncostsarereducedfromtheindustrystandardof8%(farmerincurs
3%andtheprocessorincurs5%)to2%(withfarmersavingallhis3%,andtheprocessorITCsaving3%)as
shownin
Table2.
Table2:Conventionaltransactionvsechoupalcosts
Costelement
Conventional
eChoupal
market

TrolleyFreighttoMandi
100
Nil

Filling&WeighingLabor
70
Nil

LaborKhadiKarai
50
Nil

HandlingLoss
50
Nil

SubTotal
270
Nil

ProcessorIncurs

CommissiontoAgent
100
50

CostofGunnyBags
75
Nil

Labor(Stitching&Loading)
35
Nil

LaboratFactory(Unloading)
35
35

FreighttoFactory
250
100

TransitLosses
10
Nil

SubTotal
505
185

GrandTotal
775
185

As%ofBeansValue
8%
2%

14

Rural Market e-Choupal

ThetotalcostincurredontheinitiativesofarhasbeenRs50Mn(Rs35Mncapitalcosttowardscomputersandother
hardwareatthekiosksaswellascentralservers+Rs15Mnrevenueexpenditureincurredtowardsportal
development,peopleoverheadetc).ButITChasaccruedabenefitRs.20Mn,whichistheequivalentoffull
investmenton40%ofthechoupals(kiosks).Thiscamefromtheprocurementof60,000tonnesofsoyabean.
Thenetsavingswillcomedowngradually,becausethestandardbenchmarkcostswillbeloweroncecompetition
catchesupwithsomeofthenewbusinessprocesses.Afterfactoringinsuchreductioninsavings,andconsideringthe
investmentsinexpansionofthenumberofchoupals(whichcouldmeancoverageofsomevillageswithlower
potentialthereforealowerpenetrationrate),thelikelyrevenuestreamshavebeenworkedout.Thedetailsareshown
inTable3.

Table3:FutureRevenues
RupeesinMillion

200102
200203
200304
200405
200506
Total

TotalOutflows
52.1
123.7
3.9
3.9
3.9
187.5

TotalInflows
15.3
32.5
47.5
60.0
65.0
220.3

TaxAddbackson
2.6
5.9
9.3
9.3
9.3
36.4
Depreciation

NetInflow
(34.2)
(85.3)
52.9
65.4
70.4
69.2
(Outflow)

CumulativeInflow
(34.2)
(119.5)
(66.6)
(1.2)
69.2
(Outflow)

[8]
Theinternalrateofreturn(IRR)ontheProjectworksouttobe21.55%

Further,thewholeplatformisavailableliterallycostfreefortheruraldistributionbusiness,whichshowedpromiseof
evenmoresignificantmarginsbasedonthesalesdoneonpilotscaleduringthecurrentyear.Thisincomeisnot
includedintheaboveIRRcalculations.FurtherITCsmarketshareinsoybeanprocessingindustryincreasedinone
yearfrom8%to12%,reducingthedifferencewiththemarketleader(20%).Beforeechoupalwaslaunched,its
marketsharewasaconstant8%throughoutthepriorfiveyears.Specialtransactionsonthefinishedproductsside
(exportmarketsforsoybeanmeal),likeidentitypreservedcargoflowandproducttraceabilitybacktofarmstage,
15

Rural Market e-Choupal

thoughsmallinvolumecurrently,arefacilitatingattractionofnichecustomers.Whilethenormalgrosstrading
marginsareabout4%inthesoyabusiness,nichesaleshavethepotentialtoearnupto10%,giventhedemandfor
GMOfree&organicproductsfromcertainmarkets.Aboveall,theknowledgebundledsaleoffarminputshas
contributedtoincreaseinfarmyieldsbyover10%(from1.1MT/Hatoover1.2MT/Haonanaverage),which
increasedthefarmerloyaltytowardsITCononehand,anddemonstratedthenewbusinessmodelscapabilitytobea
uniqueruraldistributionchannelwithrelativelyunlimitedscopeontheotherhand[9].

CriticalSuccessFactors
TheeChoupalexperiencehighlightsthatICTplatformscanprovideruralconnectivityandecommercesupport.
Theseplatformshaveenormouspotentialprovidedtheyareconceptualizedforthespecificneedsofthecommunity
andbusiness.Someoftheelementsthathelpedtheechoupaltoworksuccessfullyarediscussedbelow:
Comprehensiveknowledgeofruralmarkets:Ruralmarketsarebotheconomicandsocialnetworksandthereisa
strongconnectionbetweentheoperationofsocialandeconomictransactions.Understandingtheoperationsisvital
beforethesystemsareconceptualized.Useoflocalpopulation,asmuchaspossiblehelpedthenetworktogetthe
acceptanceclosely.
DesigningaWinWintransactionmodel:Thesuccessofechoupalcomesfromtheconditioninwhichboththe
farmerandtheprocessorsharethebenefitscomingoutoftheeliminationofmiddlemenandduetotimely
informationavailability.
Leveragingthelogisticschannels:Theexistinglogisticsoftheruralmarketsareleveragedbuttheyarenotableto
exploittheinformationasymmetry(unlikethatinaconventionalmarket).Inthatsenseechoupalusesthelocal
institutionsbuteliminatestheinformationasymmetrythattheyusedpreviously.
SelectionofSanchalak:BoththeselectionofSanchalakandtheacceptanceofSanchalakbythecommunityare
verycriticalforthesuccessofechoupal.ITCusedatrialanderrormethodfordevelopingtheprocedurefor
selectingSanchalaks.IntheplatformterminologySanchalakistheinterfaceformaintainingtheplatform.Forthe
farmertheSanchalakistheechoupal.Trainingandsensitizinghimforthecrucialrolehasbeenthemainreasonfor
theacceptanceoftheSanchalakbythefarmers.Sanchalak,thus,actsasthe
16

Rural Market e-Choupal

coordinatoroftheknowledgecommunity,andarepresentativeoffarming
community.

Evolvinganappropriateuserinterface:Technologyinterfaceusedinruralareashavetobeverysimple.Interface
hastobetriedforruralsettingsandonlyafteritsvalidationithastobeused.Firstly,onehastounderstandtheuser
patternandsecondly,ithastobetried,testedandvalidated.Forexample,farmersdonotunderstandtheconceptof
insurance.eChoupalevolvedasimpleinterfacingarrangementthatafarmercanunderstand.
Bottomupmodelforentrepreneurship:eChoupalencouragesenormousamountofcreativityatthelocallevel
alongwithlocalentrepreneurshipstimulation.ThefarmerandSanchalakarefreetousetheechoupalanddevelop
newuses.echoupalunleashesthecreativespiritintheruralIndia.
echoupalconcepthelpedinthecreationofskilledpersonnelinruralcommunities.Thishasapositivespillover
effect[10].

ReplicatingTheExperience
Theconceptofechoupalisapplicabletoanyagricultural&alliedactivityinruralIndia.Thebasiccharacterof
agricultureisthesameacrossIndia,butvaluechainsofdifferentcropshavetheirownintricatedynamics.Soarethe
socioeconomiccharacteristicsofdifferentregions.Thesecomplexitiesmustbefactoredin,whilemakingechoupal
operational.Consequentlythesupplychainefficiencies/revenuemodelsvaryacrosscommodities&geographies.
ITChasidentifiedechoupalasitsmajorcorporateinitiativeandmakingsubstantialinvestments[7]
Theechoupalprojectisalreadybeingscaledupfrouseforbusinesssuchascoffee,aquacultureandwheatinother
statesofIndia,aftersuccessfullycrossingthepilotstagethisseason.Incaseofwheat,forexample,the
transformationintheindustrywillbeledbyechoupalsabilitytobridgethedisconnectbetweenthewaywheatis
bought(physicalproperties),isprocessed(chemicalproperties)andthewaythefinalproductisboughtbythe
consumer(rheologicalproperties&organoleptictests)whichensuresthequalityconsistencyindifferentformsof
Atta(Indianflour).Thiswasjustnotpossibleortooexpensiveinthesystemwherewheatissoldcurrently.

17

Rural Market e-Choupal

Apartfromoriginalutilityofechoupalforprocurementoffarmproduceitisgraduallytestedforeffectivenessinto
distributionofrangeofgoodsandservicethoseruralcommunities.Thisbusinessmodelhasopenedupanentirely
newandmoreeffectivechannelfordistributionandmarketingofarangeofgoods&servicesintoruralIndia.e
choupalisalsobeingtestedmarketedfornewservicestheseincludesellinghomeappliances,consumergoodsetc
apartfromfarminputslikepesticides,seedsandfertilizers.Itwouldnotonlyfacilitateconsumerandinsurance
companysentryintounexploredandcomplexIndianruralmarketsbutalsosimultaneouslyimprovetheliving
standardofpeople.Sanchalakoranintermediaryfromthevillagewouldtakeordersfromthefarmersandvillagers
foralltheabovementioneditems.Hewouldaggregatetheordersintoabigorderandthisorderwoulddirectlybe
placedthroughnetworkwiththemanufacturerofgoodsorservices.Alltheproductsandserviceswoulddirectly
deliveredtothevillage[11].
Observingthesuccessofechoupalanditshugepotentialforsettingupaelectronicmarket,severalotherplayersare
alsocontemplatingbuildingportalsandsettingupofkiosksandoperatingechoupalkindofbusinessmodel.Ruchi,
thelargestplayerinsoyabeanexports,hasmadeabeginningwith15villages.TheTatagrouptoohassteppedin
withitsownplans,andthattoowithdualforay,onebytheTataChemicalstheotherbyRallisIndia.BoththeseTata
groupcompanieshavetheirownsetofKisanKendras,whichtotaltoaround200plusacrossvariousvillages.Tata
KisanKendras(TKK)setupearlier,haveropedintheNationalRemoteSensingAgency(NRSA)forusingits
satelliteimageryservice,tobeknownasprecisionfarming.Theservicecombinestheuseofinformation
technologyalongwithsatellitemappingtechniquestoadvicefarmstoadoptfarmingpracticesthatmaximizes
agriculturalyields.NRSAwillsupplytotheTKKsatelliteimagesforsoilpatternsandcropdistributionwhilethe
TKKswillinturninterpretthedataandsuperimposeitonthedigitizedimageofthevillagemaps.Tatagrouphas
alsotakenupfarmmanagementservicesatChitradurgainKarnatakatosupportpomegranategrowersandaccording
sources,plansareinthepipelinetoundertakecontractfarmingforfruitsandvegetablesinAndhraPradesh,wheatin
MadhyaPradeshandBasmatiriceinthenorthernstates.

18

Rural Market e-Choupal

Conclusion
eChoupalhasbeenmostsuccessfulinitiativetowireruralIndiaandtoinvolvethefarmersinlearning.ITChas
envisagedonvariousplanstoreplicatethesuccessachievedtootherstatesandexpandtheservicesofferedtoother
commoditieslikespices.ITChasalsoidentifiedeChoupalasanimportantdriverforexports,whicharetargetedat
$400millionby2005.eChoupalhasalsoattractedattentionfromtherenownedacademicians,sinceeChoupalhas
managedtoinnovatethesupplychain,andmodelappliedbyITChasenoughpotentialtobereplicatedintheunder
developedanddevelopingcountries[12].
ITChasbeensuccessfulinmakingthefarmerfeelthesenseofownershipandenthusehimtogenerateadditional
revenuebyeliminatingmiddleman.ITCthrougheChoupalhasboughtvariousaccoladessuchasGoldenStar
TradingHouseforshowingimpressivetrackrecordinexportsofagriculturalcommodities.Participatingfarmers
havebeenabletoenhancetheirincomeandeliminatethedelayingettingthepaymentoncetheproductissold.It
hashelpedinreducingdebtburdenofthefarmers.
ThesuccessofeChoupalhasgivennewlessonstothecorporatesintheIndiaandabroad.Thegainsfromthenovel
initiativearemanifoldtoITC,thefarmersandothercompanies.eChoupalhashelpedthefarmerstoimprovetheir
productivityandgetbetterprices,whereasITChasbenefitedbybettersourcingofrawmaterialsandbuildinga
backbonetomarkettheendproductswhichisvitalfortheFMCGcompanieslikeITC.
ThecasestudyofechoupalhelpsinidentifyingthefactorsthatcontributedtothesuccessoftheICTplatformin
manystates:
EchoupalhasbeenoneofthebestICTapplicationplatformsthathasbeenscaledreplicatedandsustained.Thisis
duetothefactthatitwasspecificallydesignedforthatspecificbusiness.
TheSanchalaksareselectedcarefullyandtheyhavebeenabletoworkasnonpartisancoordinators.Sanchalaks
havebeenabletoinducethefeelingofinvolvement.ThisparticipativestylehelpedICTtobuildtrustatthelocal
level.Trustisessentialinsustainingrelationshipsatthecommunitylevel.
Echoupalwascustomizedandthenvalidatedandthenexpandedtotheoperationalphase.Echoupalhasfound
acceptanceinallthreebusinessestheyhaveventuredinto.Themodelofvalidatingandthenrollingitouthasbeen
aneffectivewayofimplementinganewbusinessmodel.
19

Rural Market e-Choupal

Echoupalhasprovidedeconomicbenefitsevenforthesmallfarmers.Everybeneficiarygetsbenefitandthe
equitablebenefitsmakestheadoptionveryrapid.
Intensivetraininganddistributedleadershipconceptfacilitatedtheacceptanceoftheplatformconcept.The
empowermentofpeoplethroughlocalactionandtrainingreducesthedisparities.Theabilityofthechoupalstodeal
withmanyinputsprovidesforeconomiesofscope.
echoupalhasbeenheraldedastheattemptatmakingICTplatformsenhancethemarketaccess,byeliminatingthe
useofmiddlemen.ITChadthevisiontoconceptualizeandimplementthisprocurementcummarketingplatform.It
isalowcost/multibusinessmodeloperatedbythefarmerrepresentative.Ithasbeenvalidated,scaledandsustained
formanybusinessesbyITC.Byembarkingonthisinitiative,ITChasshownthatICTplatformscanbenefitevenif
themarginalfarmers.

References
http://www.itccorporate.com/agri_exports/echoupal.html#top.
SurjeetDasGupta,dated5/3/2002,ThechoupalasametamarketBusinessstandard,Strategist.
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S.Sivakumar,CEOofITCIBD,dated8/4/2002,CollaborationWorksBusinessworld.
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Ch.PrasanthReddy,dated26/12/2001,ProjectSymphony:ITCteaminspiredbyBeethovenbusinessline,internet
edition.
http://agricoop.nic.in/stats.htm.
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PhilipEvans,ThomasSWurster,Blowntobits,HarvardBusinessSchoolPress.1999.
FrancesCairncross(2001)TheDeathofDistanceHarvardBusinessSchoolPress,page119153.

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