ITC Limited

e- CHOUPAL
Anupriya Sharma, PGDM FT 2009-11
Typical Character of the Indian Farmer

• Fragmented
• Dispersed
• Heterogeneous and
• Weak Infrastructure (Physical, Social, Institutional)

Anupriya Sharma, PGDM FT 2009-11

#5
Anupriya Sharma, PGDM FT 2009-11
Anupriya Sharma, PGDM FT 2009-11
Anupriya Sharma, PGDM FT 2009-11
Solution : Access to Price Information – Anytime & In the Village

Anupriya Sharma, PGDM FT 2009-11

 e-Choupal – An Overview

• Launched in June 2000, 'e-Choupal', has already become the largest initiative
among all Internet-based interventions in rural India. 'e-Choupal' services today
reach out to over 4 million farmers growing a range of crops -- in over 40,000
villages through 6500 kiosks across 10 states (Madhya Pradesh, Haryana,
Uttarakhand, Karnataka, Andhra Pradesh, Uttar Pradesh, Rajasthan, Maharashtra,
Kerala and Tamil Nadu).

• ITC in conjunction with local farmers created the e-choupal system that is acting as
a catalyst in rural transformation by providing access to latest information of the
agro sector, developing local leadership and creating a profitable distribution.

• e-choupal is a Hindi word which means – “Village meeting place”. e-choupal is a

virtual market place where farmers can transact directly with a processor and can
realize better price for their produce.
Anupriya Sharma, PGDM FT 2009-11
E-choupal is a virtual market that brings together vendors and customers.
Geographical distance no longer restricts participation of farmers. The main hurdle of
traditional market is that information asymmetry is inherent in the market where as e-
choupal provides for transparent transaction. The transaction time at the ITC hub is
less than at the mandi i.e. 2 or 3 hours where as 1-2 days in mandi. Some more
points are:-

·Customer centric and not dependent on intermediaries.

·Capable of being used for many commodities & multiple transactions.

· Easily scalable once it is verified.

· Uses local talent and local people to develop local leaders.

· Uses all the existing institutions and legal frameworks.

· Scientific way of inspection, testing and

Anupriya weighing.
Sharma, PGDM FT 2009-11
The e-Choupal Business Model

Farmer Ghani
Village Trader

E-Choupal

Regulated Markets Producer Coop

(Fair Market Price) (Negotiated Price)

Cooperative Mill
Commission Agent
(hired by ITC)
ITC Commission

Private Miller

ITC

Anupriya Sharma, PGDM FT 2009-11

 The e-Choupal Value Proposition
vLow Cost Last Mile
•Distribution at Low Cost
•Wide reach in Rural India
•High Credibility- Increased Product Penetration
•Right prices to consumers
•Continuous visibilty/ availability

vIntelligent First Mile

•Sharply Targeted Consumers
•Product Endorsement
•Education on product usage and benefits
•Brand building at low cost
•Superior understanding of rural consumers

vFootfall to Business
•One stop shop at a tractor-able distance
•High Quality of Products and Services
•Right Prices
•Shopping Environment
Anupriya Sharma, PGDM FT 2009-11
 How is e-Choupal different?
vFreedom of Information

Information and Knowledge is free of cost

No initial Investment of the Sanchalak
Not subsidized- Govt. does not pay, the shareholders look for
a competitive return

vFreedom of Transaction

Farmers are free to sell their produce anywhere

vEntrepreneurship

No salary paid to Sanchalaks- a commission based model

Anupriya Sharma, PGDM FT 2009-11

Solution : Transparency and Accuracy in Weighment

Anupriya Sharma, PGDM FT 2009-11

 The e-Choupal Services
• Relevant & Real-time Information
– Commodity prices, Local Weather, News

• Customised Knowledge
– Farm Management, Risk Management

• Supply Chain for Farm Inputs

– Screened for Quality, Demand Aggregation for Competitive
Prices & Efficient Logistics

• Direct Marketing Channel for Farm Produce

– Lower Transaction Costs, Better Value through Traceability

Anupriya Sharma, PGDM FT 2009-11

 Other Services through e-Choupal

• Distribution of Products and Services to Rural Markets

• Micro marketing
– Product/Services Demos
– Marketing and Brand Building activities

• Pilots
– Bhoomi
– eHealth with Private Health Service Providers
– eEducation
– Rural BPO

Anupriya Sharma, PGDM FT 2009-11

Anupriya Sharma, PGDM FT 2009-11
 E-CHOUPAL-THE VIRTUAL VERTICAL
INTEGRATION MODEL OF SCM
S
a
n
c V
VSAT/ Internet h i
Information Flow a l
I l l
T a a
C k g
e
ITC Local
Hub
Samyojak
Physical Flow

Agricultural Best-Practices, Weather, FAQ’s

Prices
Produce
Virtuous Aggregated demand for inputs
Cycle
Agricultural Inputs
Information from the ‘trenches’
Ideas for new products and services

Anupriya Sharma, PGDM FT 2009-11

 Getting e-Choupal to the Farmer

• Sanchalak’, a lead farmer selected from within the village and

trained to interface between the computer (placed in his house)
and the other farmers, is designed as a 3-in-1 solution to

a. Overcome the literacy barrier

b. Keep the costs low
c. Effectively manage the relationships in the village

Anupriya Sharma, PGDM FT 2009-11

#12
Role of Sanchalak & Samyojak

Anupriya Sharma, PGDM FT 2009-11

 Transaction Costs

The Mandi Chain

Rs per MT

Trolley Freight to Mandi = 100

Filling & Weighing Labour = 70
Farmer Incurs
Labour Khadi Karai = 50 270
Handling Loss = 50

Commission to Agent = 100

Cost of Gunny Bags (net) = 75
Processor Labour (Stitching, Loading) = 35
505
Incurs Labour at Factory (Unload) = 35
Freight to Factory = 250
Transit Losses = 10

Total Chain 775 V V2

Anupriya Sharma, PGDM FT 2009-11

 Transaction Costs

The eChoupal Chain

Rs per MT

Trolley Freight to Mandi = 100

Filling & Weighing Labour = 70
Farmer Incurs
Labour Khadi Karai = 50 270
Handling Loss = 50

Sanchalak = 50
Commission to Agent = 100
Processor Cost of Gunny Bags (net) = 75
505
Incurs Labour (Stitching, Loading) = 35
Labour at Factory (Unload) = 35 185
Freight to Factory 100 = 250
Transit Losses = 10
775
Total Chain 185

Anupriya Sharma, PGDM FT 2009-11

Anupriya Sharma, PGDM FT 2009-11
 ICTs make it possible !
• The eChoupal Price Discovery : Farmer @ Receiving End Vs
Empowered
– Value through Unbundling what was bundled together earlier (Information &
Transaction)
• Unbundles
– Price information is now available at the door step without a necessity to go to
mandi
– Has an option to fix price at the village itself. However, at the time of selling,
still retains the freedom to go to mandi if he believes he gets better offer
there.

• The Input Transaction

– Value through Bundling (Information, Knowledge, Transaction) what was
available unbundled earlier
• Bundles
– Information on Weather and Best Practices from the website
– Knowledge of ‘what to do’ from the Experts
– Efficient supply platform for inputs purchase that enables aggregation and
scale efficiencies
Anupriya Sharma, PGDM FT 2009-11
 Use of ICT in ITC eChoupal to build an end-to-end solution

v Real-time multicasting of market prices, to delink flow of

information from transaction
– enabling the farmer to take an informed & empowered
decision (no sunk cost of transporting the produce to the
mandi before price discovery)
• Unbundling & rebundling of transaction components
– Knowledge (what to use), Information (when to use),
Transaction (ordering an input) – each from a different
provider
• Decoupling Source of Knowledge from Delivery
– Integrates specialized back-end with contextual front-end
• One-to-one interactive ability of Internet, in conjunction with
other facilities like soil / virus labs
– Delivers customized farming solutions
• Broadband connectivity
– For remote services (crop diagnostics)

Anupriya Sharma, PGDM FT 2009-11

 Non ICT Ingredients of ITC eChoupal
• Interlocking network of partnerships brings the “best-in-class”
information, knowledge and inputs
– ITC + Met Dept + Universities + Input Cos + Samyojaks
(erstwhile Commission Agents)
• Community participation in design and execution
– Fountainhead of innovation
• Experimentation based Project Management model
– Roll Out, Fix It, and Scale Up
• New Organisation structure to manage this innovation effectively
– 3x4 matrix
• Accountability through Public Oath

Anupriya Sharma, PGDM FT 2009-11

#16
 3 X 3 eChoupal Infrastructure
• ICT Kiosk with Internet Access
– In the house of one trained farmer, Sanchalak
– Within walking distance of target farmers

• Warehousing Hub / Store

– Managed by the erstwhile middleman, Samyojak
– Within tractorable distance of target farmers

• Collaborative Network of Companies

– Orchestrated by ITC
– With a Pan-Indian presence

Anupriya Sharma, PGDM FT 2009-11

Anupriya Sharma, PGDM FT 2009-11
Anupriya Sharma, PGDM FT 2009-11
 What’s in it for ITC?

vBetter supply chain for ITC’s Food and Agri Business

Costs, Quality, Traceability

vAccess to the Underserved Rural Markets

Through a Virtuous Cycle created by “Larger Incomes” and
founded on “Trust” that is built

vNew ITES Business Opportunities

Health, Education, Entertainment

vShareholder Value through Serving Society

Also, the infrastructure serves as a reliable delivery
mechanism for resource development initiatives (eg. Water,
animal management)

Anupriya Sharma, PGDM FT 2009-11

 ITC’s Gains
• Lower procurement costs
• Direct interaction with
600 farmers - Control on
quality & supply security
Costs (Rs./ Metric Ton)

500

400 250
• Low cost distribution
channel
300

75 • Access to market
100
200
70 0
intelligence
10 85
100
0

0
Mandi e-Choupal

Commission Handling and Transit Losses

Labor Costs Bagging and Weighing
Transportation

Anupriya Sharma, PGDM FT 2009-11

Anupriya Sharma, PGDM FT 2009-11
 What’s in it for the farmer?
vBottom line for the farmer

•Increased yields

•Improved Quality

•Reduction in Transaction costs

vPower of Scale to the SMALL Farmer

vCustomized Knowledge despite HETEROGENEITY

vReal time information despite DISTANCES

Anupriya Sharma, PGDM FT 2009-11

 Farmers’ Gains
• Access to information
– Empowered decisions
– Improved agriculture
• Economic benefits through lower
300
transaction costs and process
Costs (Rs./ Metric Ton)

250 100 efficiencies

200
• Served with dignity
150 70
• Knowledge bundled sale of
100 50 goods and services
50 50
0
• Co-opted in product design
0
Mandi e-Choupal • Hope for a brighter future
Handling and Transit Losses Labor Costs
Bagging and Weighing Transportation

Anupriya Sharma, PGDM FT 2009-11

 The Privileged Assets of eChoupal
• ICT Infrastructure:

– Computer
– Internet
• Multimedia
• Broadband
• Smart Card

• Physical Reach:
– Choupals within walking distance
– Multipurpose WH hubs within driving distance

• Key Intermediaries:
– Sanchalak (1 per cluster of 5-6 villages) 1500/state
– Sanyojak (1 per group of 10-15 choupals) 100/state
– ITC (support the farm produce marketing end)
Anupriya Sharma, PGDM FT 2009-11
#23
Anupriya Sharma, PGDM FT 2009-11
 The Corporate Social Responsibility Ladder
v Responsible Implementation of Core business activities

v Poverty-focused social investment and philanthropy programmes

v Getting engaged in Public Policy dialogues and institution building

v The OPPORTUNITY for ITC…is to demonstrate, how it has added a

fourth step in this ladder to create the most enduring of
values…

…by building a structure, whereby its need for creating shareholder

value is enmeshed with that of the farming community in a
mutually supportive, interlocking and interdependent partnership

Anupriya Sharma, PGDM FT 2009-11

Anupriya Sharma, PGDM FT 2009-11
 Challenges faced by ITC e-Choupal
v Power is usually available for only a few hours a day

v Telecommunication infrastructure in villages is poor.

v Illiteracy about computer in rural areas as well as rural population

has low trust on electronic system.

v Selection of an educated, intelligent, reliable and matured person a-a

sanchalak.

v Improper knowledge about rural market.

v Vicious circle of intermediaries (Adatiya & Brokers).

v Improper and complex user interface on e-choupal.

v Lack of rules and regulation related to electronic choupal.

v Mistrust about inspection, testing and weighing of produce on centres.

Anupriya Sharma, PGDM FT 2009-11
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Anupriya Sharma, PGDM FT 2009-11