S Shivakumar was a visionary who envisaged a plan to build an cost effective infrastructure which helped IDB acquire a competitive advantage .He conceived a number of initiatives, one of which being the farmer & supply chain management initiative -eChoupal. What began as an effort to re-engineer the procurement process for soy, tobacco, wheat, shrimp, and other cropping systems in rural India , also has created a highly profitable distribution and product design channel for the company. An e-commerce platform is a low-cost fulfillment system focused on the agricultural procurement process of rural India. The eChoupal system has catalyzed rural transformation that has helped to alleviate rural isolation, create more transparency for farmers, and improve their productivity and incomes. This report analyzes eChoupal initiative for efforts in major cropping systems (coffee, wheat, and shrimp aquaculture).
Objective of the study
The objective of the study was to understand how Information Technology has as provided a more transparent system and has empowered the local people which in turn increases the trust and brings in fairness in the system. Information technology provided and maintained by a corporation, used by local farmers has brought about rural transformation.
Conventionally farmers have been exploited by the middle men because of their high dependence on them. Lack of infrastructure and updated information on various aspects of agricultural, gives an unfair advantage to the middle men. Therefore there is need to eliminate these middle men and provide a fair and just mechanism which would offer enough incentive for the farmers to invest in quality agricultural input so that he can yield the fruits of his labour.
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Traditionally farmers would have to travel long distances to sell their agricultural commodities at mandis (places where agricultural products are bought and sold), where middlemen would judge the quality of the product and set the prices. Most of the time unfair and unscientific methods are used to quantify the value of the products. The difference in price between a good and bad quality product was very small, leaving the farmers with very little incentive to invest and produce quality output.
The Indian farmer was hence trapped in a vicious cycle of minimum risk and investment taking ability which would lead to low productivity and ultimately low profit or gains. This has made the Indian agricultural sector globally uncompetitive.
E-choupal is the brainchild of ITC’s Agricultural Business Division (agricultural export), this web portal directly links ITC (Agricultural Business Division) to farmers in rural areas via the internet for the procurement of agricultural and aqua-agricultural products like soya bean, coffee, wheat, prawns, etc. Farmers can negotiate the rates of produce with ITC Limited directly; it also provides farmers with updated information, new products and services which would increase the productivity of their yield. Farmers can obtain better prices and lower transaction costs by receiving latest global and local weather information, current market rate prices, scientific farming practices, soil test samples, etc on this web based portal.
“Choupal” in Hindi means a village gathering place, computers and internet access at these places (choupal) allow farmers to not only obtain information on mandi prices but also place orders for seeds, fertilizers, pesticide, etc. This facility helps the farmers improve the quality of output and in obtaining better prices. A literate farmer is trained to operate the kiosks and act as an interface between illiterate farmers and the computer.
The e – Choupal initiative was specifically designed to solve ITC’s supply chain problems concerning the agricultural sector of India which is featured with fragmented farms, weak infrastructure and intensive involvement of middlemen. It was planned to enhance the efficiency of ITC’s supply chain by delivering quality products at a sustainable rate to customers all around the world.
ITC’s main aim was to improve the efficiency of their agricultural procurement process but an important by-product of e-choupal is the enhanced competitiveness of Indian farmers where this system has been implemented. The vicious cycle has given way for the virtuous cycle of higher risk and investment which leads to higher productivity and better margins. Increase in rural income would lead to greater demand for industrial goods which would ultimately lead to growth of the Indian economy.
The E-choupal structure
The E-choupal structure was put in place with the help of ITC Infotech. The key insight for ITC Ltd. was from the farmer’s point of view that they require an end-to-end solution. These services were traditionally provided by middle men, thereby enabling farmers to make informed decisions through personalization. Now basic model looks like –
This is achieved without losing the advantage of large scale operations (that the Mandi offers) and by overcoming inadequate infrastructure.
The Sanchalak (trained farmer) manages the internet kiosk or e-choupal at the village. A lot of time and money is saved by the farmer in this system. The farmer can check the latest prices from the e-choupal and choose when he wants to sell and to whom. He has to transport his produce to the e-choupal which has the necessary equipment to check the quality of the produce. The sanchalak then completes all transactional formalities. The farmer can also get specific information on crop cultivation and agricultural inputs from expert through web based e-choupal portal. Today there are 5,400 Kiosks in 31,000 villages covering 3.5 million farmers.
A sanchalak is typical farmers himself, so he is like a lead consumer. He then sells his experience to more consumers. These and other lead consumers have a self interest in creating more value for the e-choupal ecosystem. In this process e-choupal has actually been transformed from being a supply chain initiative to a platform or experience which provides the dignity of choice and self expression to farmers. In the future the platform will provide consumer goods, financial products, resources for capability building like health and education. The same architecture is leveraged by the customers themselves for non agriculture produce purposes. These changes could be brought about in co-creation environment where the role of employees of ITC ltd. also underwent paradigm shift. The table below shows the same transverse –
When Sivakumar started out the e-choupal project he had asked the management for Rs.50 Lakhs for experimenting, the board gave him Rs.10 Crore. Sivakumar was worried because then the return required from the project would be Rs.3 Crores. But today after the success of e-choupal it is easy to justify resources.
The challenge in the co-creation model is that one needs to give up control on what the organisation is creating. However Sivakumar feels that it is possible to orchestrate so that a positive ecosystem is created. The collective bargaining power of the consumers or the farmers in this instance came to light when in Madhya Pradesh traders went on strike feeling threatened by e-choupal and 25,000 farmers came to the streets in support of e-choupal. So in effect today e-choupal is a brand, owned and created by these people.
An IT-Driven Solution
From the conception of the model, an IT-based solution was recognized as fundamental to optimizing effectiveness, scalability, and cost. Information technology is 20% of all the effort of ITC’s e-choupal business model, but is considered the most crucial 20%. The two goals envisioned for IT are:
â€¢ Delivery of real-time information independent of the transaction. In the mandi system, delivery, pricing, and sales happen simultaneously, thus binding the farmer to an agent. E-Choupal was seen as a medium of delivering critical market information independent of the mandi, thus allowing the farmer an empowered choice of where and when to sell his crop.
â€¢ Facilitate collaboration between the many parties required to fulfill the spectrum of farmer needs. As a communication mechanism, this goal is related to the commitment to address the whole system, not just a part of the system.
Mandi process e-choupal process
Topology of e-choupal
Implementation of e-choupal model
‘e-choupal’ and Information Technology virtually cluster all the value chain participants, delivering the same benefits as vertical integration does in mature agricultural economies.
‘e-choupal’ makes use of the physical transmission capabilities of current intermediaries like aggregation, logistics, counter-party risk and bridge financing -while it disintermediates them from the chain of information flow and market signals.
Business Model consists of the following:
Choupal: A Hindi word meaning village gathering place
Mandi: A Government mandated market-yard where farmers sell their crops
Sanchalak: A village farmer who runs the e-choupal and acts as a representative of the company in the village.
Samyojak: The commission agent in his role as collaborator.
Farmers having click and mortar capabilities the sanchalaks – themselves, enable the agricultural community to access ready information in their local language on the weather and market prices, disseminate knowledge on scientific farm practices and risk management, facilitate the sale of farm inputs and purchase farm produce from the farmers’ doorsteps.
Real-time information and customised knowledge provided by e-choupal enhance the ability of farmers to take decisions and align their farm output with market demand, secure quality and productivity. The aggregation of the demand for farm inputs from individual farmers gives them access to high quality inputs from established and reputed manufacturers at fair prices. As a direct marketing channel, virtually linked to the ‘mandi’ system for price discovery, e-choupal eliminates wasteful intermediation and multiple handling. In this way it significantly reduces the transaction costs.
e-choupal ensures world class quality in delivering all these goods and services through several product and service specific partnerships with the leaders in the respective fields, in addition to ITC’s own expertise.
The farmers benefit through enhanced farm productivity and higher farm gate prices, while ITC benefits from the lower net cost of procurement (despite offering better prices to the farmer) having eliminated costs in the supply chain that do not add value.ITC is able to procure at a lower net cost despite offering better prices to the farmer.
The Status of Execution
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 – soyabean, coffee, wheat, rice, pulses, shrimp – in over 40,000 villages through 6500 kiosks across ten states (Madhya Pradesh, Haryana, Uttarakhand, Karnataka, Andhra Pradesh, Uttar Pradesh, Rajasthan, Maharashtra, Kerela and Tamil Nadu).
Problems encountered while setting up and managing these ‘e-choupals’ are as follows
Infrastructural inadequacies, including power supply, telecom connectivity and bandwidth
The challenge of imparting skills to the first time internet users in remote and inaccessible areas of rural India.
Several alternative and innovative solutions are being deployed to overcome these challenges
Power back-up through batteries charged by Solar panels, upgrading BSNL exchanges with RNS kits
Installation of VSAT equipment
Local caching of static content on website to stream in the dynamic content more efficiently
But some of these solutions are expensive and difficult to implement.
Effects of e-choupal
ITC Limited has provided 6500 e-choupal and computers and Internet access in rural areas across several agricultural regions of the country, where the farmers can directly negotiate the sale of their produce with ITC Limited. This online access enables farmers to obtain information on mandi prices, and good farming practices, and to place orders for agricultural inputs like seeds and fertilizers. This helps farmers improve the quality of their products, and helps in obtaining a better price. Each ITC Limited kiosk having Internet access is run by a sanchalak – a trained farmer. The computer is housed in the sanchalak’s house and is linked to the Internet via phone lines or by a VSAT connection. Each installation serves an average of 600 farmers in the surrounding ten villages within about a 5 km radius. The sanchalak bears some operating cost but in return earns a service fee for the e-transactions done through his e-choupal. The warehouse hub is managed by the same traditional middle-men, now called samyojaks, but with no exploitative power due to the reorganization. Indeed these middlemen make up for the lack of infrastructure and fulfill critical jobs like cash disbursement, quantity aggregation and transportation.
With the augment of e-choupal farmers have benefited a lot
Rise in the income of the farmers
Improvement in the quality of output
Fall in transaction cost
Time saving for the farmers
Reduced physical labour of travelling to mandis
Reduction in waste
E-choupal provides for the following needs of the framers
Prices prevailing in the mandis ( real time updates are provided)
Best practices of the industry
Not only this, e-choupal has also provides for additional help
General interest information( Agriculture research, global farming trends, etc)
e-choupal acts as a one stop shop for buying farm inputs a market for selling goods and an internet café for communication and information services
Here we see that the farmer does not pay for the information and the knowledge that he gets from the e-choupal
This helps the farmers to have a better control over the choices they make with respect to the produce what prices they should sell it etc and also access to a huge lot of useful information. All this helps them in increasing their productivity. e-choupal has provided a more transparent system and has empowered the local people which in turn increases the trust and brings in fairness in the system
Information technology provided and maintained by a corporation, used by local farmers has brought about rural transformation.
Internet kiosks are just one aspect of e-choupal this can further be extended to educating the farmers on new practices, land preparations, crop diagnostics, harvesting techniques, etc.
The e-choupal Roadmap
ITC now plans to leverage its e-choupal infrastructure to sell third-party products, provide rural market research services, and in the social sector, to provide services like health advisories and enable e-governance.
ITC e-choupal has embarked in on providing best of the class retailing and shopping experiences to the rural consumers by building retail shopping complexes that provide integrated facilities under one roof. Under the brand ‘Choupal Sagar,’ these shopping complexes house-a procurement centre, retail store, food court, farmer facility centre and healthcare clinic.
In healthcare services, a pilot project has been launched along with leading corporate healthcare service providers, to extend reliable and quality healthcare services to the remotest villages. Several health camps conducted during the pilots are encouraging and the project is in the midst of scaling up to other locations.
ITC e-choupal is currently piloting delivery of quality education services to the rural areas leveraging the physical and digital infrastructure developed for commodities sourcing and consumer retail services.
There are presently 6,500 e-choupals in operation. ITC’s future plans to make optimum use of the network. ITC Limited plans to scale up to 20,000 e-choupals by 2012 covering 100,000 villages in 15 states, servicing 15 million farmers.
Ever since its launched there have been changes in its format, which can be highlighted from the following –
IDEA: To give power of scale to small farmers by aggregating them as sellers (of produce) and as buyers (of farm inputs)
FARMERS’ GAIN: They get bargain and choice – the two key virtues of competition
ITC’S GAIN: Access to inputs for its agri business; offer the use of network to other companies
REACH: By 2006, 40,000 villages covering 4 million farmers
OFFERING: Network now offered five services:
â€¢ Information: weather, price, etc.
â€¢ Knowledge: farming methods, soil testing, etc.
â€¢ Purchase: Seed, fertiliser…to insurance
â€¢ Sales: Farmers sell crops to ITC centres
â€¢ Other: Cattle care, water harvesting, women employment etc
NEW BUSINESSES: Add two new anchor businesses: 1) Rural jobs and employability and 2) Personalised agri services. Plus strengthen existing commodity sourcing
MORE INTERACTION: Through Choupal Saagars and Haats and via mobile phones
NEW TECHNOLOGY: Use of especially enabled mobile phones, in addition to PCs, for two-way interaction with farmers; use of analytics; new partners
They have been upgrading different phases. They plan to make best up gradation always and strive create a strong bridge between the farmers & them through means of technology.
At the end of the day what a farmer wants to achieve is higher income through increased yields, improved quality and reduced transaction costs, which is exactly what e-choupals provided. These e-choupals provided the power of scale to the small farmers, customized knowledge despite heterogeneity and real-time information despite distances.
ITC’s e-choupal leverages IT to improve farmers’ decision making ability to align farm output with market demands, and to improve productivity and brings in best of breed partnerships. The company targeted the bottom rung of the farmers first as the company’s vision was to cover the largest segment of rural India thus spanning 100,000 villages across 15 states by building capability to deliver superior shareholder value sustainably. ITC’s only. The reverse flow carries FMCG, durables, automotives and banking services back to villages.
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