E-CHOUPAL

Background 23% of GDP from agriculture, 66% of workforce, feeding 1 billion people. Green revolution – India is a net exporter of food grains. Indian farmer remains poor. Agriculture system based on small inefficient land holding Primary producers have been traditionally paid much less - exploited by traders & intermediaries. Traders well positioned to exploit buyers and sellers in mandi system. Farmers bring the goods to mandi, sell in auction.

WHAT IS E-CHOUPAL Choupal means gathering place in Hindi. The e-Choupals serve as both a social gathering place for exchange of information and an e-commerce hub. It has re-modelled the procurement process for soy, tobacco, wheat, shrimp. E-commerce and E-education platform focused on the needs of rural India.

Concept Why is this venture so popular right now? Initiative to attempt to combine Services and an Effective Business Model successfully Designed to address the rural problems of: Fragmented farms Weak institutions Involvement of intermediaries Information Asymmetry Three tier structure Local part for Responsiveness Regional level for Controlling Apex element for Resources Allocation

The Business Model The idea: One choupal would serve 10 villages within a 5 km radius The village e-choupal is housed in the Sanchalak/ Co-ordinator’s house. The Sanchalak is central to the business model. Such a role helps ITC by: Providing trust among the farmers on behalf of the community Removing the need of a physical infrastructure such as the kiosk As a communication channel between the illiterate farmers and ITC The Sanchalak is paid a commission on each transaction undertaken (0.5%). The main attractions for such a post are : Increased social standing among the community Willingness to help the village Profit motive

The Web Portal

Farmer Queries Market Rates of Different Mandis

Website weather pricing news best practices Q & A Market Prices Entertainment Sports Education Communication

Building Blocks of E-Choupal One-stop-shop Information (weather, prices, news) + Knowledge (farm management, risk management) + Inputs (screened for quality) + Output (convenience, lower transaction costs) Network of Partnerships Bringing in “best in class” in all offers ITC+IMD+Universities+Input Cos etc. Community Interface A lead farmer identified from within the village and appointed as Choupal Sanchalak More effective because the Sanchalak is one among the community

Assets of E-Choupal ICT Infrastructure - Physical Reach Computer Internet Multimedia Broadband 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 25-30 choupals) 50/state ITC (support the farm produce marketing end)

Operating Model System support Computer connected to VSAT or internet, serves an average of 600 farmers in 10 villages within 5 km. Each e-Choupal costs US$ 3-6,000 to set up and about US$ 100 per year to maintain System support 15 engineers 25 motorcycles Estimated cost for per visit US$6.60 30% calls for UPS problems

Technology Specification Technical Architecture From Dial-up to VSAT: Connectivity Evolution in e- Choupal. Hardware:- Power Solar battery charger, UPS Connectivity : Dial-up modemVSAT modem, antennae PC with Intel Celeron processor, printer Software:- Operating System Windows 98 Word processor Ankur (Hindi word processor) Other Sunera Kal – Short movie on e-Choupal Video Clips – Soil testing

Mandi Operation Process Disadvantages: - Long distances between mandis(grain markets). - Monopolization of information by the trader communities. - Fragmented payments by traders to framers.

E Choupal Supply Chain Benefits: - Able to differentiate between ‘Risks in Farming’ and ‘Financial risks in Trading’ [ Possible by correcting the information asymmetry] - Also allows the farmer an enlarged choice set – whether he wants to sell to ITC or to the mandi

E-Choupal Services Relevant & Real-time Information Commodity prices, Local Weather, News Customized 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

Farmer Gains Farmers have access to prices and can make critical decisions of when and where to sell Saving on transportation costs from the field to the mandi ITCs electronic weighing scales and transparent checks ensure ‘intentional spillage’ doesn’t occur ITC’s agricultural inputs cost substantially less than those offered at the mandi Farmers save almost 2.5% over the mandi system ( Rs.400 – 500 per ton of soy) thanks to a more efficient market system e.g. cultivation of soy has increased from 50 – 90% in e choupal areas They can take advantage of services provided by the e-choupal to improve their crop output and farming practices Increased self respect as they are treated as co partners in a business relationship

ITC Gains Lower transaction costs: ITC pays only a 0.5% commission to the Sanchalak as compared to the 2.5 – 3% paid to the agents under the mandi system (including true cost of inefficiency and intermediary costs) Has found it cheaper to reimburse farmers transportation costs that pay agents for transportation. (managed to save almost RS. 200 per ton) Direct virtual vertical integration through e -choupal allows ITC to communicate directly with the farmers It gets excellent ‘bottom up information’ on pricing, product quality, soil conditions etc. from the Sanchalak Allows them to develop a long term supplier relationship with the farmers, ensuring supply security over time By providing quality agricultural inputs and buying quality crops, ITC can ensure a satisfied customer base

Losers Commission agents Mandi laborers Bazaars near the mandi Some mandi operations Competing processors

Futuristics - Services through eChoupal 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

Future plans - partner with banks Non-cash loans for farm inputs Insurance and Risk Management Services Loans to sanchalaks, create enterpreneurs Direct loans to farmers based on sanchalak recommendations

Solution : Access to Price Information – Anytime & In the Village

Taking ICTs & Biz Models to Rural India Training

Taking ICTs & Biz Models to Rural India Power Connectivity Website

Laboratory Services For soil testing (agriculture) and virus testing (aquaculture)

Current Network Size Adding Six New Choupals Every Day State Choupals Hubs Madhya Pradesh 1750 43 Uttar Pradesh 42 Maharashtra 900 22 Rajasthan 500 15 Karnataka 100 2 Andhra Pradesh 150 3 5,150 127 Villages 31,000 Farmers 3,500,000 Adding Six New Choupals Every Day Intend Scaling up to 100,000 Villages in 15 States by 2010

THE SOCIAL IMPACT OF E-CHOUPAL Agricultural Best Practices Customized Quality Solutions Intelligent Product Deployment E.g.-In Khasrod, soy production declined from a high of 100% to 50%. After ITC’s involvement, soy is seen that 90% of farmers are planting the crop. Link farmer and their families to the world Tracking of future prices from Chicago board of trade as well as from Mandi Children use computer for schoolwork, play games and obtaining print out of mark sheets Youngsters use computers to research the latest movies, cell-phone models, and cricket news etc.

Summary Price sensitive and cash leveraged system to knowledge based operation - The ITC e-choupal model shows that ICT can be creatively used on win-win basis. All stakeholders part of the system. A creative business model is required to spur economic growth at the village level, mere dissemination of information may be inadequate in certain contexts

ITC Leading private company, 90 year old history Market capitalization US $ 14 billion, turnover US $ 5 Billion Amongst World's Most Reputable Companies by Forbes magazine Diversified presence in Cigarettes, Hotels, Paperboards & Agri- Business, Information Technology, Branded Apparel, Personal Care, Stationery, other FMCG products.

ITC Created ABD in 1990 as an agri-trading company - aiming to “offer the world the best of India's produce.” Feed ingredients, Food grains, Coffee, edible nuts, Shrimps, processed foods. 60% of group’s forex earning INR 200 crore export, INR 300 crore local earning. Awards – UNIDO, TERI, NASSCOM – Golden peacock award, Business Transformation award.

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