eChoupals A Study on the Financial Sustainability of Village Internet Centers in Rural Madhya Pradesh

ICTs and Sustainability Author focuses on financial sustainability b/c without financial sustainability project will not survive –Large funding agencies typically fund the ‘incubation period’ India’s largest commercial ICT project ITC - IBD eChoupal –Ability to recover investment of ICT infrastructure through a more “efficient” agricultural supply chain

Before eChoupal (Mandi) Farmers in trolleys -> Mandi -> auction to Agents Necessity of Mandi / Commision Agents –Lack of physical infrastructure (distances, small sized farmers) –Responsibility / risk of dealing with large number of farmers Costs to farmer –Transportation Cost –Cost of weighing produce –Labor charges moving product from Mandi to warehouse –Price fluctuations based on quality of product -> traders mix product & sell for profit –Paid in installments (few days to few months)

eChoupal Set up agri supply chain that reaches farmers (like Mandi) –Set up to increase soybean quality, decrease procurement cost Soybean Procurement –Farmers come directly to one of 9 warehouses –Spends less per ton of produce No commission / transaction costs to middlemen –Crop tested for quality –Crop weighed on automatic scale (people don’t calibrate the instruments)

eChoupal Operational Model Find an entrepreneur –Farmer w/ medium sized operation in a village to become “agent of change” –To receive.05% of every rupee sold through Choupal (incentive) ITC pays start-up costs –Computer & printer / solar panels / UPS with battery / optional VSAT (internet) –No rent b/c using sanchalaks –Entrepreneur pays electricity / telephone / travel to office

eChaupal vs Mundi eChaupal Advantages to Farmers –Provides futures price information to farmers They can know when to come to sell crops –Bypass middlemen by selling directly to ITC –Reimbursement to farmers for transport costs –No payment to for bagging / weighing –Pay farmers full payment at time of transaction –Farmers save Rs 270 / ton Only reaches middle-sized farms

Reduction of Transaction Costs

eChoupal Sustainability over 16 months Primarily used for soybean procurement Choupals: 461 in Year 1 -> 796 Year 2 –133 K tons of soybean product purchased through eChoupals –Saved Rs 25.8 million in transaction costs (2% of produce) Rs 194 Rs / Ton savings 15.9 Million savings through improved quality (No Mixing) Total Savings = Rs 41.7 Million Total Investment = Rs 75.7 Million

eChoupal Financial Analysis Extrapolation of 16 months of financial data to 7 years Variables –20% to 50% failure rate of crop from lack of rainfall –6% to 15% - Lost opportunity cost (vs. investment in bonds, etc.) –15% to 20% cash depreciation Would recover its costs within 3.9 to 5.8 years

Payback Period Not only sustainable, but eventually profitable

Future Stories? Mobile Phones vs. Computers? Information exchange between the farmer & the eChoupal? eChoupal used as distribution of other products / services? Reach into poorer and more remote parts of India? Dissemination of agricultural best practices?