ITC Echoupal Report GR 1 OSCM

Contents
Sl No Name of the Topic Page No

1 ITC e-Choupal : An Introduction
2 ITC’s Supply chain of Soya bean before
e-Choupal Initiative
3 ITC’s Supply chain of Soya bean after
e-Choupal Initiative
4 Synergies for ITC
5 Critical Analysis of ITC’s Supply Chain
RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods
6 Comparison with Hariyali Kisan Bazaar

7 Future of e-Choupal
8 Conclusion
9 Reference
Supply Chain Analysis of ITC e-Choupal
1. Introduction
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e-Choupal is an initiative by the large agriculture processing company, the Indian Tobacco
Company to equipped the rural mass with computer and technology so that they can prepare
themselves to handle various challenges such as fragmented farms, weak infrastructures and
most important a number of intermediaries. The core objective of the initiatives was to bring
efficiency to the procurement process of ITC which lead to empowerment and sustainability
of the rural farmers.
The e-Choupal initiatives directly link the rural farmers with the company for the procurement
of agriculture and aquaculture products, such as soya beans, coffee, and prawns. Traditionally,
these commodities were procured by ITC from the mandis (major agricultural marketing
centers in rural areas of India), and a number of intermediaries was involved in buying the
produce from farmers and moving it to the mandis. But with the e-Choupal initiatives the
farmers are can directly negotiate the sale of their product with ITC. With the IT infrastructure
the farmers are able to access various information such as the demand and the rate in the
mandis, farming practices in addition they are also able to place their order for the agriculture
input products (fertilizers, seeds etc). This access to information helps farmers in improving
the quality of produce and obtaining better prices. Elected from the village itself, a literate
farmer acts as the interface between the illiterate farmers and the computer.
Background
ITC incorporated on August 24, 1910 under the name of “Imperial Tobacco Company”. In
1974 it was reorganized in the name of “ITC Ltd”. It is one of the Indian companies to feature
in “Forbes A-list” for 2004 and featured in Forbes 2000 list. It has topped in certain values:
 Sustained value creation (BT-Stern Stewart survey)
 Operating profits
 Cash Profits
The ITC groups of company have a turnover of Rs 7.5 billion yearly. It has a significant
presence in various verticals such as tobacco and cigarettes, paper packaging, hotels and
tourism, IT and agricultural exports. ITC procures various agricultural products such as
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soybeans, coffee and oil seeds for export purpose. The supply chain involve for these product
is very much complex and involvement of a number of players. The farmers sold their
produced to the small traders known as kachha adat and they sales it to the larger traders
known as pakka adat. This pakka adat takes the produced to the local mandis where they trade
the products with the large traders and ultimately by the broker ITC procure the products. This
long supply chain result to high procurement price for ITC and in lost profit opportunities for
the farmers. On the other hand because this long supply chain is very time-consuming system,
it’s also results in deterioration in the quality of the products.
The e-Choupal concept was introduced by ITC in June, 2000. The-Choupals in the villages
were converted to e-Choupals by setting up the required IT facilities such as computers and
internet connectivity. Initial investment of Rs. 40,000 was done for e-Choupal formation with
dial-up connectivity. In some cases the VSATs were installed with an investment of
Rs.100,000. The concept was build on a core value to involve the farmers of the village with
e-Choupal in every aspects such as operation, maintenance etc. One Sanchalak, an educated
farmer of the village, was elected among the farmers of the village for the operation of the e-
Choupal. He acts as an interface between the computer and the illiterate farmers, and retrieves
information on the behalf of the farmers.
The ITC covers all the cost for the setting of the e-Choupal and the Sanchalak bears all the
operational costs such as electricity, internet charges etc. A Sanchalak spends around Rs.
5000- Rs. 8000 per year for running of the e-Choupal. On the return the Sanchalak is paid a
commission of 0.5 % per ton of processed products. Apart from the above ITC spends around
Rs. 5000 every year for the maintenance of the e-Choupals. The ITC also provides formal
trainings to the Sanchalaks for operating the e-Choupal.
The farmers are able to access various information from e-Choupal includes crop prices,
weather, scientific farming practices, farmer peer groups, and soil testing services. All the
information are provided in hindi language for the farmers so that they can easily understand
the messages. The farmer carries a sample of his produce to a local kiosk and receives a spot
quote from the Sanchalak. If the farmer accepts the quote, he can transport the produce
directly to an ITC centre and get the payment within two hours.
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The ITC provides the transportation to the farmers to bring their produce to the Collection
centres. The produce is weighed in modern weighbridge with accuracy. Apart from that ITC
reimbursed the transportation cost to the farmers. If a farmer is in very remote area he has an
option to sell the produce to the Sanchalak. By this system the farmers are able to avoid the
hectic procedures in the local mandis where there is no accuracy of measurement, chances of
damage of the produce, late payments and other unavoidable issues. The intermediaries are
not removed from the chain instead they have become a essential part of the chain known as
Samayojaks ( coordinators) who assists ITC in establishment of the e-Choupals buy field
survey and other activities. They manage the physical transportation of sales made at the e-
Choupal, collect price data from local auctions, and maintain records. These coordinators earn
a 1 percent commission on product processed.
2. ITC’s Supply chain of Soya bean before e-Choupal

Initiative
ITC Group’s International Business Division (IBD) was started in 1990. This division is
engaged in exports of a wide range of agricultural commodities. It contributes almost 60% of
ITC Group's total foreign exchange earnings. ITC-IBD has developed a focused approach on
strengthening its core competencies in some of selected commodities. Today, ITC-IBD
continues delivers agri-commodities like Feed Ingredients - Soyameal, Foodgrains - Rice

(Basmati & Non Basmati), Rapeseed Meal, Wheat & Wheat Products, Pulses, Coffee, Black
Pepper, Edible Nuts - Sesame Seeds, HPS Groundnuts and Marine products like Shrimps and
Prawns. The largest export of ITC-IBD’s is soybean meal (a rich source of protein) which are
exported to the animal feed mills around the world, competing with several transnational
trading companies, mainly from the USA, Brazil, and Argentina.
The traditional Supply chain for Soya bean was as bellows before the e-Choupal initiative of
ITC
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Efficient backward linkage is essential for any exporting company in the competitive global
market. But existing supply chain for soybean procurement through mandi was a bad
experience for ITC- IBD. The cost factor was not at all favour of farmers or ITC. In this
whole process cost incurred by farmers and ITC can be depicted as bellow.
Farmer incurs (Rs Trolley freight to Mandi =120

per MT)
Labour =50
Kaccha Adtiya =150
Handling Loss =50

Total =370
Processor Incurs(Rs Kaccha Adtiya =100
per MT)
Cost of Gunny Bags (net) =75
Frieght to Factory =120
Handling at Mandi =40
Total=335
Total(Rs per MT) =705
(Source: Seminar on Bottom of the Pyramid and CSR, IIM-K, Sept. 24, 2008)
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This analysis was the first trigger point for re-engineering the whole supply chain, the idea
that was conceived by ITC as they were thinking of reducing overall supply chain cost to
become more competitive compared to other market players.
2.1. Why ITC thought of e-Choupal
As per the case study written by Kuttayan and Rao of The University of Michigan Business
School (2003) there were three reasons for which ITC thought of re-engineering the Supply
chain.
a. The Tactical Imperative

 ITC’s distance from Farmer : As there was no direct interaction of ITC with farmers
ITC’s knowledge about crops, suppliers and hence supply risk, control on quality of
product was very limited
 Daily price inflation : Mostly the Adtiyas buy both good and bad quality at different
price throughout the day and sell it to ITC by mixing both the quality at a single price
and hence ITC had a very little command over quality.
 Seasonal price Inflation: As last day’s mandi price acts as benchmark price for next
day; most of the times Adtiyas inflate the price for a prolonged period and in the
process overall seasonal procurement prices of ITC shoot up.
 Capture of Intra-day Price shifts: ITC provided the Adtiyas a price range for a day
to buy within. If agent’s average buy price within the day is less ITC’s given price then
he sold to ITC at their price and pocketed the whole benefit. If the agent’s average buy
price within the day is higher than ITC’s price he bought it but the Adtiya stored it and
sold it it to ITC very next day at higher price. In this process Adtiyas took the whole
benefit of intra-day price shifts
b. The Strategic Imperative
With globalization and opening up of Indian market in early 90s several competitors like
Cargil, Olam International etc. entered Indian market that had better margin-to-risk ratio
because of wider options for risk management. Hence in 1998 ITC tried to address the
following advantages that were enjoyed by their competitors
 Horizontal spread - Presence in dozens of countries allows customer proximity and a
diversified supply base
 Vertical presence – Integration allows companies to extract supply-chain efficiencies
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 Risk management – Operating in countries where financial and logistical institutions
to manage risk lowers the cost of bearing risks
To address horizontal integration deficiency, ITC heavily banked upon IT and hence the idea
of e-Choupal was conceived, a customized IT application and realignment of business goals
and processes to manage risk and build ITC’s knowledge base.
c. The Social Imperative
ITC thought of the long-term development of rural India as competitive supplier and buyer of
a range of goods and services. Hence ITC banked upon e-Choupal venture
Indian distribution channels are marred with inefficiencies emanating from a rigid
bureaucracy & improper infrastructural support for the various stakeholders. Necessity being
the mother of invention goes the line & that was justified by ITC-IBD’s unique initiative that
aimed at integrating the interests of all the stakeholders minus the impediments of an
inefficient supply chain.
3. ITC’s Supply chain of Soyabean after e-Choupal

Initiative
An analysis of the supply chain post re-engineering

Illustrating the benefits in terms of cost taking the same soyabean example, we arrive at the
following figures
Farmers Incurs (Rs/MT) Trolley Freight to ITC Hub Rs 120

Processor Incurs (Rs/MT) Commision to Sanchalak Rs 50
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Cost of Gunny Bags (net) Rs 75
Storage and Handling at Hub Rs 40
Cash Disbursement Costs Rs 50
Total cost of Chain Rs 335
Best Practices followed by ITC at each stage of the supply chain
a. Pricing
 Previous day’s closing price used to determine benchmark price for a given day
 This info and previous day mandi prices communicated to sanchalak through e-
Choupal portal. Daily mandi prices fed by commission agents into the portal
 Sanchalak inspects the sample that farmer brings to him, assesses quality and makes
deductions (if any) to benchmark price, gives farmer a conditional quote

 Benchmark price represents upper limit on quoted price
 If farmer decides to sell to ITC, sanchalak gives him a note – name/village/quality
tests/approx. quantity/conditional price
b. Outbound Logistics
 Farmer proceeds to the nearest ITC procurement hub with the note
 Some procurement hubs are ITC factories, others are purely warehouse operations
 ITC’s aim is to have a processing centre within 30-40 km radius of its farmers
c. Inspection & grading

 Sanchalak does the first inspection as a visual inspection, and inspect for foreign
matter, moisture content
 Conditional pricing is based on this

 At the ITC procurement hub, laboratory tests are conducted on a sample of farmer’s
produce
 The tests are conducted after the sale, price is not altered
 To change farmer’s attitude and appreciating produce quality, ITC is developing lab
tests to reward farmers with reward points for better quality supply
d. Weighing & payment
 Farmer’s produce is weighed on electronic weighbridge
 He is then given full cash payment
 Freight expenses are reimbursed
 Appropriate documentation at each stage and farmer is given a copy of that
 Samyojaks handle cash operations
e. Hub Logistics
 Farmer transports his produce to the nearest processing centre or storage hub
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 ITC incurs the transportation cost
 The farmer bears the risk of transportation until produce is delivered and the sale is
completed
f. Technological Support
 Nodal platform catering to commodity blending, agricultural trading, e-choupal &rural
distribution
 24,000 personalized business function points
 110,000+ pre-built business function points
 Integrated Business Systems for Direct Agriculture Procurement, Rural Distribution, e-
Choupal Management, Exports, Insurance, Aqua Processing & Commodity blending
 Built-in commission calculation engines
 Usage of pre-built components for Logistics, Sales, Financials
 Support for 8 local languages
3.1. The Benefits that accrued to ITC by use of technology
Functions Benefits
e-Choupal management Single window for monitoring and controlling all
Sanyojak and Sanchalak through e-Choupal
Diverse Business Processes Standardization across product groups and also
meeting the diverse requirements
Productivity On time finance book closure
Stock Information Multi-level stock visibility across enire supply

chain
Control of Subcontracting operation Visibility of subcontract operation for aqua
3.2. A win-win deal
Farmer gains ITC gains
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 Better info content  Disintermediation savings
 Better info timing  Freight costs
 Less transportation costs  Quality control
 Transaction duration  Risk management
 Weighing accuracy
 Professionalism
Farmers benefit from more accurate weighing, faster processing time, and prompt payment,
and from access to a wide range of information, including accurate market price knowledge,
and market trends, which help them decide when, where, and at what price to sell. Farmers
selling directly to ITC through an e-Choupal typically receive a higher price for their crops
than they would receive through the mandi system, on average about 2.5% higher (about
US$6 per ton). The total benefit to farmers includes lower prices for inputs and other goods,
higher yields, and a sense of empowerment. The e-Choupal system has had a measurable
impact on what farmers chose to do: in areas covered by e-Choupals, the percentage of
farmers planting soy has increased dramatically, from 50 to 90% in some regions, while the
volume of soy marketed through mandis has dropped as much as half. At the same time, ITC
benefits from net procurement costs that are about 2.5% lower (it saves the commission fee
and part of the transport costs it would otherwise pay to traders who serve as its buying agents
at the mandi) and it has more direct control over the quality of what it buys. The system also
provides direct access to the farmer and to information about conditions on the ground,
improving planning and building relationships that increase its security of supply. The
company reports that it recovers its equipment costs from an e-Choupal in the first year of
operation and that the venture as a whole is profitable.
4. Synergies of e-Choupal with ITC’s other business
4.1. Stakeholder analysis of ITC e-Choupal

Primary Stakeholders Interest
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 Access to information
– Empowered decisions
– Improved agriculture
 Economic benefits through lower transaction costs
Farmer Community and process efficiencies
 Served with dignity
 Knowledge bundled sale of goods and services
 Co-opted in product design
 Hope for a brighter future
 Lower procurement costs

 Direct interaction with farmers - Control on quality &
supply security
ITC
 Low cost distribution channel

 Access to market intelligence
 gain access to global markets through ITC and

Commission Agents commission to compensate some of the loss revenue
(Kachha Adatiyas & Pakka
Adatiyas)
4.2. Understanding the Synergies

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ITC’s e-choupal initiative stands as a classic example of CSR i.e of corporate strategy linking
business purpose to larger societal purpose. It is acting as a catalyst with alignment with the
farmer in transforming the scenario of Indian rural market. It is not only providing access to
latest information to them but also developing local leadership and creating profitable
distribution. From the company’s point of view it is improving the supply chain by reducing
the procurement cost, improving quality and traceability.
ITC’s strategic intent is to promote e-choupal as a significant two wat multi dimensional
channel which can efficiently carry goods and services out of and in to the rural India.The
network of 65000 e-Choupal centres spread across 40000 villages has become an outlet to
various agri-commodities like wheat, soyabean, rice, aqua-products, maize etc. The reverse
flow carries FMCG, durables, automobiles, banking and insurance services in the rural areas.
As of today ITC e-choupal is one of the top 5 alternate channels for LIC policy sales amd is
contributing to 10% of the total weather insurance market in India.
5. e-Choupal : A critical analysis
5.1. Where are the efficiencies in e-Choupal network?

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 Last mile solution with low cost: the effective web based innovative channel created
by ITC made close interaction with farmers and ITC. Although this channel was
primarily meant for procuring agriculture output from producers but later on ITC
envisaged this channel to be utilized as distribution of other products to farmers like
agriculture inputs, FMCG products etc. and needless to say this channel reduced the
distribution cost of these products substantially because same channel is used for both
farmers’ output and input and other necessary items. Using same logistics for large
quantity of product leads to economics of scale to the ITC.
 Full Service approach: instead of supplying agriculture inputs only as in traditional
network, ITC sells these inputs with information. A chronic problem of Indian
agriculture is application of fertilizers indiscriminately without soil testing. E-Choupal
came out here with solution. It does sell all agriculture inputs with required
information through websites and services like soil testing at the doorstep of farmers.
 Demand aggregation: one of the hurdles in the traditional distribution system is to
serve farmers highly scatted in remote areas where physical infrastructure is a
limitation. Here in ITC e-Choupal, sanchalak at village level collect the individual
orders from farmers then aggregate it before pass on this order to hub. Thus this
unique system optimize the utilization of the system with the benefit of both farmers
and ITC because farmers get products at discount price and ITC increases its margin
by selling bulk quantity at low price.
 Third party seller: it is well established that there is huge untapped potential of rural
markets. Realizing this, E-Choupal is selling various products of third party (e.g HUL)
who otherwise find difficulties in channelizing their products in traditional way. E-
Choupal is thus creating a network for third parties to help them reach out scattered
but potential customers in cost effective manner.
 Extensive use of information technology: ITC e-Choupal is an innovative and

probably the largest web based intervention in rural India. It eliminates the problem of
knowledge gap of farmers, reduces the cost of marketing of both inputs and outputs.
The whole system is also makes the entire supply chain transparent and speedy.
 Access to information about customers: traditional system relies upon village level
agent, retailer to gather information on needs, buying behaviour, income pattern etc.
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due poor coordination among various channel partners, access to required and
authenticate information is very limited. E-Choupal here has a solution to this
problem. Sanchalak being from the same village has vast knowledge about customers.
When all the sanchalaks collect information from their respective villages, company
gets very reliable and correct information for a particular area, consequent upon which
it can formulate plan to achieve its marketing objectives. Essentially the whole system
eliminates the problem of poor coordination and channel conflict among various
channel partners.
 Pull based strategy: the e-Choupal mechanism educates farmers about best practices
and understand what inputs he need and why it is needed. It leads to a desired pull
forces from customer for the products. Thus as opposed to pushing strategy, it
eliminates the cost of advertisement to convince the farmers.
5.2. Drivers of Supply chain of e-Choupal
 Information: information on price of produces at different mandis, availability of

inputs, management crops etc is disseminated very smoothly using web based
technology. Ot makes farmers to be attached with e-Choupal and transact through it.
 Logistics at Hub: scientific weighing machine, good packaging system, resting place
at the hubs are the core competencies of e-Choupal system.
 Transportation: as hubs are located near to the villages it is easy for the farmers to
get their produce there by bullock cart. So locational advantages has enhanced the
efficiency of choupl supply chain.
 Storage facilities: ITC has sophisticated and scientific storage structure at the hub
from where produce is transported to processing centre.
 Capacity of storage facilities: big storage structures at ITC hub managed by skilled
persons are instrumental in making the entire chain viable.
 Conscious about quality: ITC always emphasizes on quality of the farmers’ produce.
Framers get report on quality of his produce. It helps farmers to enhance the quality of
their produce which in turn increase value addition to the chain.
5.3. Who are in problems because of e-Choupal
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 Operation of Mandi: scale of operation of existing mandis under APMC act is
substantially reduced. It is losing revenue in the form of tax which in turn impedes the
infrastructure development of these mandis. In many places these mandis have become
redundant with the replacement by e-Choupal.
 Threat to mandi labourers: many mandi labourers who were engaged in various
value addition activities like weighing, bagging, grading lose their jobs due diversion
of products from mandi to ITC hub.
 Bazzar near mandis: market near the mandis is also reported to be losing sales as
farmers selling at hub purchasing their essential items from choupal sagar adjacent to
the hubs.
 Threat to the existing processors: there are large number of unorganized processors
who were procuring from farmers, are now facing problem of acute shortage of raw
material as farmers are now selling their produces at hub for better prices and services.
It is indeed threat to the small scale processor in long run.
5.4. Risk associated with e-Choupal
 Eroded power of commission agents: the commission agents operating in mandis are
very powerful with respect to controlling price in favour of buyers. With e -choupal in
place their activities reduced to managing activities at hub. The margin they earn at
hub is also low compared to what they were earning from mandis. It triggers an unease
relationship between commission agent (samyojak) and ITC which can possible be
threat to ITC as other competing players can cash in on this unease relationship.
 Interrupted customer Services: empirical studies shows that despite good

coordination among sanchalak , samyojak and ITC processors, still there is grievances
among sanchalaks with regard to timely supply of inputs, information etc. this problem
interrupt the continuous flow of services provided by e -choupal.
5.5. Critical analysis using AAA Value Chain Analysis

Framework
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Agility – This refers to the drives need for flexibility in supply chain when there is increasing
sources of uncertainty
Adaptability- This refers to the way supply chain needs to fit in the changing needs when
there are challenges like changing need for product/market/time
Alignment- This refers to alignment in differential interests of multiple players when there is
a trend towards distributed supply chain
6. Comparison between e-Choupal and Haryali Kisan

Bazaar
6.1. Business Model of Hariyali Kisan Bazzar
HKB is an initiative from DSCL, a leader in agri-input sector in India. HKB is a pioneering
project as it contributes to rural and agricultural development while being a profitable
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business venture. Each HKB centre caters to communities within a 25-30 km perimeter and
impacts the life of about 20,000 households. HKB’s business model is to provide targeted
services to farmers in remote regions. It also reinforces the need for farming communities to
have access to information and technology. At present, there are 302 stores of HKB in eight
states viz--U.P, Rajasthan, Punjab, Harayana, Chattisgarh, Maharashtra, MP and A.P, and also
there is plan for expansion in these states.
HK
HK
B
B
Each HKB outlet has a qualified agronomist which provides technical advice for cultivation
of various crops. These agronomists help the farmers to cultivate crops which are fetching
good return in the market and farmers get great moral support to go for any crop without
hesitation or risk. In Punjab, farmers are going for intercropping of Moong with Cotton which
has helped them in increasing their income by Rs7500-8000 per acre. HKB has also
contributed in increasing yield by giving farmers improved seed varieties. In UP, farmers are
now getting more yields by using hybrid paddy seeds. On an average they are getting 10
quintals more paddy per acre.
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Like ITC e-Choupal, HKB is also providing knowledge about mandi prices and commodity
futures to the farmers. Farmers are also provided with ATM access. HKB is also creating local
employment by training local youths which then provide information and knowledge of high
return crops.
In the above system HBK is in integration with ICICI bank for providing financial help to the
farmers.
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Other companies
Loan for pass
through to farmers
Extension service
Repayment of loan Produce procurement

with interest
The model is very much similar to e-Choupal, except that whatever is procured from the
farmers are given to the companies who in food processing as ITC is into this business in
contrast DSCL is not doing that as it not in the food business.
6.2. Comparison
e-Choupal Haryali Kisan Bazaar

Main objective Procurement , Rural Retail

Benefit to the computer application to provide provide better method of cultivation
farmers market information by trained agronomist
Synergies Synergies with products which Synergies with what DSCL is
ITC is manufacturing selling(inputs to agriculture plus
other services
Economies of 25-30 km area coverage 20-25 km area coverage
scale
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Procurement near small town Strategically placed near petrol
centre pump mainly
7. Future of ITC e-Choupal

Initial success of e -Choupal showed how technology can be used in remote hinterland to
change the rural economy where timely and authentic information is limited. It is indeed and
reengineering the existing supply chain to safeguard the interest of all the stakeholders. E-
Choupal is now envisaged to bring more benefits in deprived rural markets. Both customers
and corporate can leverage upon it in future in following ways
 Spread of technology: e-Choupal is instrumental in making villagers particularly student

technology enabled. Students get their documents printed from choupal saving time and
visit to nearby towns. Sanchalaks are now connected with not only domestic price but also
price movements in international markets. This is for sure will enhance the knowledge
base of farming community and improve the decision making power.
 Access to credit: access to timely credit at low cost is thrust areas of government policy.
The concerns here is effective and suitable distribution network to provide credit to the
needy farmers. In future e-Choupal is expected to address this problem in following ways
a) E-Choupal can reduce the transaction and administration cost of credits.
b) Banks can touch informal sector which is crying for credit needs.
c) Instead of providing credit in cash, financial institution can provide credit in kind
with tie up with input markets to minimize the unproductive use of credit.
d) Sanchalak is the best person to tell about client’s credit history, amount of credit
needs, flexible repayment etc. in this way sanchalak helps banks designing suitable
loan products.
e) There is lot of opportunity to tie up with banks, input competition to take this
intervention in new height.
 Availability of insurance products: micro insurance is increasingly being tried out in
rural areas but problem with this product is lack of awareness, affordability, availability
and acceptability. E-choupal can be utilized to usher the micro insurance market in rural
areas in following ways
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a) Product designing part will be quite easy for the insurer once they receive actual
information on insured, the risk associated with, previous insurance experience etc.
b) There can be tie up between ITC and insurance agency with respect to collection of
premium but it must be at the convenience of farmers
c) There is greater opportunity for weather insurance to be sold through e-Choupal
Renewal of premium will be easy as sanchalak in his choupal can track on status of
premium of every client through website
d) The web based technology can be used to pay premium making it simple and speedy
7.1. e-Choupal version 3.0

The concept “e-cChoupal” has able to reach four million farmers in a period of six years
(2000-2006) and ITC has a vision of reaching 100 million farmers in next few years. Recently
it has come up with the version 3.0, which is a bundle of innovative services to the farmers.
But there is reason why ITC has come up with version 3.0,
“The core business of sourcing the commodities directly from farmer was restricted by the
government as it has a speculation that the concept may endanger the farmer’s interest both
economically and socially. As a result the whole sale price was hiked up and the inflation
reached two digit numbers.”
Before discussing about the version 3.0, here we have tried to do a comparative analysis
of the two previous versions.
Parameters Version 1.0( the start) Version 2.0( the scale-up)
Idea The concept gave a power of scale to By 2006, 40,000 villages covering 4
the small farmers by aggregating them million peoples.
as sellers ( of produce ) and as buyers
( of farm inputs )
Farmer’s gain The farmers get bargaining power  Information on weather, price
and a opportunity of have choice etc
 Knowledge on farming
methods,
soil testing etc
 Purchase of seed, fertiliser to
insurance
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 Farmers sell crops to the ITC
Centers
 cattle care, water harvesting
ITC’s gain  Access to inputs for its agri  ITC was able to procure
business; offer the use of network to fresh commodities at
other companies reasonable prices from the farmers
Version 3.0
In version 3.0 of e-Choupal concept, ITC has tried to integrate various verticals of the
farmer’s need. The strategy is to deepen the e-Choupal concept in the rural area and cover the
maximum number of the farmers in short time. ITC has given three core areas in version 3.0
and they are,
a) New business development:

In this strategy ITC added two new anchor businesses to e-Choupal and they are
 Rural jobs and employability ( tied up with Monster India)
 Personalised agri services plus strengthening existing commodity sourcing
b) More interactions:
“Choupal Sagar” is the exclusive rural outlet of ITC, where the farmers can access their
desired products and the information on various products. By this initiative various FMCG
companies with agri-input companies are able to reach the rural mass which was earlier a
myth. Apart from that ITC has tied up with NOKIA to provide appropriate infrastructure by
mobile service so that dissemination of the information related to farming, pricing and other
3
valuable information can be assessed by the farmers and enable communication between the
farmers and the company.
c) New technology:
By mobile phones the farmers will able to get the information related to their cropping
pattern, price etc. The unique feature of this facility is that the farmers will get customised
service as per their need.
8. Conclusion
ITC e-Choupal is serving the dual agenda by bridging the rural isolation and the resulting
disparities of education and economic opportunity, while simultaneously creating a potentially

large profit opportunity for the organisation willing to tackle the inefficiencies. The model
shows how a large corporation can blend a social mission and an ambitious commercial
venture that it can contribute in rationalizing the markets and increasing the efficiency of
agriculture system. The model is also shows how Information Technology in bringing
transparency, increasing information. Emerging areas like telemedicine, e-Governance,
education and entertainment will soon included in the gamut of service of e-Choupal network.
The model exemplifies sustainable convergence of apparently contradictory objectives of
shareholder value maximization and creation of social wealth. It is the core tenet that drives
and is crucial to the scalability of the model. The project started in Madhya Pradesh (Central
India) with a pilot of 6 choupals (village community kiosks) in June 2000, and as of today, is
scaled up to 5400 choupals across 6 states (MP, UP, Karnataka, AP, Maharastra, Rajasthan)
reaching 3,500,000 farmers engaged in 12 agri-commodities in 35000 villages. ITC e-
Choupal, with its digital infrastructure and associated human and organization capacities built,
has already become rural India’s largest Internet based intervention and is surging towards the
vision of servicing 100,000 villages by 2010 reaching out to 10 million farming households.
From 2000-04, ITC’s market share went up from 8% to 12%, the transaction costs came down
from 8% to 2% and the farmers’ price realizations went up by 20 to 25% through better price
discovery, low wastages, yield improvements and new trading contract formats. The e-
Choupal system gives farmers more control over their choices, provides a transparent process,
3
a higher profit margin on their crops, access to information that improves their productivity
and above all respect and fairness for the local people and communities.
9. References
http://planningcommission.gov.in/reports/sereport/ser/stdy_ict/4_e-choupal%20.pdf
www.dscl.com/Business_Agree_HarKisBzr.aspx?PID=27
http://www.farmingfirst.org/2009/08/hariyali-kisaan-bazaar-developing-rural-businesses-in-
india/
http://www.caseplace.org/d.asp?d=2943
http://www.business-standard.com/india/news/haryali-kisan-bazaars-to-go-national/255635/

ITC Echoupal Report GR 1 OSCM

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Contents

Sl No Name of the Topic Page No

6 Comparison with Hariyali Kisan Bazaar

 Sustained value creation (BT-Stern Stewart survey)

2. ITC’s Supply chain of Soya bean before e-Choupal

continues delivers agri-commodities like Feed Ingredients - Soyameal, Foodgrains - Rice

Farmer incurs (Rs Trolley freight to Mandi =120

Handling Loss =50

2.1. Why ITC thought of e-Choupal

a. The Tactical Imperative

c. The Social Imperative

3. ITC’s Supply chain of Soyabean after e-Choupal

An analysis of the supply chain post re-engineering

Farmers Incurs (Rs/MT) Trolley Freight to ITC Hub Rs 120

Best Practices followed by ITC at each stage of the supply chain

deductions (if any) to benchmark price, gives farmer a conditional quote

c. Inspection & grading

 Conditional pricing is based on this

3.1. The Benefits that accrued to ITC by use of technology

Stock Information Multi-level stock visibility across enire supply

3.2. A win-win deal

Farmer gains ITC gains

4. Synergies of e-Choupal with ITC’s other business

4.1. Stakeholder analysis of ITC e-Choupal

 Lower procurement costs

 Low cost distribution channel

 gain access to global markets through ITC and

4.2. Understanding the Synergies

5. e-Choupal : A critical analysis

5.1. Where are the efficiencies in e-Choupal network?

 Extensive use of information technology: ITC e-Choupal is an innovative and

5.2. Drivers of Supply chain of e-Choupal

 Information: information on price of produces at different mandis, availability of

5.3. Who are in problems because of e-Choupal

5.4. Risk associated with e-Choupal

 Interrupted customer Services: empirical studies shows that despite good

5.5. Critical analysis using AAA Value Chain Analysis

Supply Chain Analysis of ITC e-Choupal

6. Comparison between e-Choupal and Haryali Kisan

Repayment of loan Produce procurement

e-Choupal Haryali Kisan Bazaar

Main objective Procurement , Rural Retail

7. Future of ITC e-Choupal

 Spread of technology: e-Choupal is instrumental in making villagers particularly student

7.1. e-Choupal version 3.0

Parameters Version 1.0( the start) Version 2.0( the scale-up)

a) New business development:

disparities of education and economic opportunity, while simultaneously creating a potentially

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