e-Choupal

Indra's Drishtikona (Viewpoint): Indra's weblog: Individual Archive

It's achievement

5,050 choupals, 29,500 villages, 3.1 million farmers.

Using e-choupal to source a range of farm produce (foodgrains, oilseeds, coffee, shrimps).

Marketing a variety of goods and services though e-choupal (agri-inputs, consumer goods, insurance, market research).

Transactions: $100 m (2003)

It's ambition

To reach 1,00,000 villages, 10 million farmers by 2010.

Source a larger range of farm produce (spices, vegetables, cotton).

Market a wider variety of goods and services (education, health, entertainment, e-governance)

Transactions: $2.5 billion (2010)

The New York Times, The Economist, the Harvard Business School and the United Nations- all have described the initiative as path breaking.
ITC's e-choupal network with 37 companies, NGOs and state governments as parteners is creating a new revolution for villages by establishing a direct link between what consumers use and what farmers grow.

THE POWER OF 'e'
The Choupal is a Hindi word for village square where elders meet to discuss matters of importance. The letter "e" has brought in a computer with an Internet connection for farmers to gather around and interact not just among themselves but with people anywhere in the country and even beyond. ITC installs a computer with solar-charged batteries for power and a VSAT Internet connection in selected villages. The computer's functioning is free from the usual troubles of power and telecom facilities in rural area. A local farmer called sanchalak (conductor) operates the computer on behalf of ITC, but exclusively for farmers. The e-choupal offers farmers and the village community five distinct services:

Information: Daily weather forecast, price of various crops, e-mails to farmers and ITC officials, news-all this in the local language and free of cost.

Knowledge: Farming methods specific to each crop and region, soil testing, expert advice-mostly sourced from agriculture universities-all for free.

Purchase: Farmers can buy seeds, fertilisers, pesticides and a host of other products and services ranging from cycles and tractors to insurance policies. Over 35 companies have become partners in the e-choupal to sell their products through the network.

Sales: Farmers can sell their crops to the ITC centres or the local market, after checking the prices on the Net.

Development work: NGOs working for cattle breed improvement and water harvesting, and women self-help groups are also reaching villages through e-choupal. In some states farmers can even access their land records online, sitting in their village. Access to health and education services through e-choupal begins next month.
In many villages e-choupals have brought a significant change. Be it for accessing newspapers online in the mornings or checking the supply of products they ordered on the Net, or watching movies on farming techniques in the evenings, farmers frequent e-choupal at all times of the day. Each e-choupal covers between five and six villages.
The sanchalak or pratinidhi- a farmer from the local community provides the most critical link in the e-choupal network. So e-choupal is run by the farmer and for the farmer even though it is fully paid for and maintained by ITC. Sanchalaks have become the agents of change. They are the farmers' pointmen for information, sales and purchase.
And then there is an incentive for the sanchalak. For every quintal of the produce sold to ITC from an e-choupal, the sanchalak gets Rs 5. He also gets a commission on every product or service farmers buy though e-choupal. This has turned sanchalaks into entrepreneurs. It is in his interest to maximise e-choupal transactions, which benefits ITC. But since he is from the village, he also has to earn the trust of villagers and is answerable for deals made through him.
Sanchalaks are required to take a public oath of serving their community without discrimination and sign a social contract to spend a part of the income they earn from e-choupal on community welfare.
To manage the hub of 50-odd e-choupals, ITC appoints a sanyojak (coordinator) who is either a former mandi trader or a local dealer of ITC products. He is the link between ITC and the sanchalaks. He also earns a commission on e-choupal deals.
By building this unique human organisation in which farmers, traders, companies, government agencies and NGOs compete and collaborate with each other, the ITC is-by design or by default-creating a new institution that is not a company, not a cooperative venture, not a government department but has some merits of all. It is this institutional innovation.

EMPOWERING THE SMALLEST
Indian farmers typically buy at retail prices and sell their produce at wholesale prices, losing out on both ends of the deal. By virtually aggregating them, e-choupal brings the power of scale to the smallest of farmers. ITC ensures that there are at least two suppliers of all products sold through the e-choupal. Farmers can pool their demand, compare prices and place orders on the Net. Bargain and choice-two key virtues of competition-are delivered to the farmers right on their doorstep.

When it is time to sell the produce, e-choupal helps the farmers by breaking the monopoly of local markets that are controlled by trade cartels. In most mandis, farmers are cheated at several stages-arbitrary pricing, underweighing, delayed payments. In Uttar Pradesh, farmers lose between 10 and 30 per cent of their income to such malpractices. ITC is setting up its own purchase centres in the six states covered by e-choupals. The farmers' response has been overwhelming. In 2001-2, the company purchased 60,000 metric tonnes of crop through e-choupal. By 2003-4 the purchase increased to 2,10,000 tonnes and in four months of 2004-5, the company picked up 1,80,000 tonnes of farm produce.

For farmers it is a win-win situation. Sitting in their village, they can check the prevailing purchase price at the mandi and the ITC centre through e-choupal and sell wherever they wish to. ITC's entry into crop purchase invariably means a rise in mandi rates too, benefiting even those farmers who can't sell to ITC. In places where ITC rates aren't higher than the mandi rates, farmers are drawn to ITC centres because the company uses electronic weighing, better quality testing and ensures spot payment.The model is win win for also the final consumers. The companies can share the saving in cost with consumers.

Some cases
Shukla from his five-acre field in Malau had never produced more than six quintals of crop per acre. Last year Shukla reaped up to 12 quintals of corn per acre. Reason: for the first time in his 20 years of farming, he used high-yielding, branded seeds bought through e-choupal. Akhilesh's wheat crop nearly doubled and the income from sale almost tripled, because of better seeds, better herbicides and better sales prices-all achieved in a single year..
In Andhra Pradesh, a shrimp farmer logs on to the Internet to check the prices of shrimp in the local market and decides the best time to sell. A soya bean farmer in Madhya Pradesh also checks the price movements of soya bean on the Chicago Board of Trade from his village and in his local language. That gives him and other cultivators an idea of the future prices of soya bean in the local market. Are they all transiting from the world of low-knowledge, low-productivity, low-income farming to one of information-based, high-productivity, high-income agriculture?

And the business aspects
ITC is setting up six e-choupals a day at the cost of about Rs 3 lakh per installation (Rs 2 lakh for hardware and Rs 1 lakh for pre-installation preparation). Since each e-choupal covers between five and six villages, the company is entering 30-36 new villages a day. About Rs 125 crore already invested in e-choupal. ITC is committed to spending Rs 1,000 crore. A chain of rural malls will part of e-choupal initiative. My entry on the first Indian rural mall relates to that.(Archives- October5, 2004)

With global restriction on tobacco, ITC intends to expand fast its food division with e-choupals as a critical link in its supply chain. Sourcing inputs directly from farmers (instead of agents) gives ITC a competitive edge over its rivals in quality and cost. The company is able to build a link right from farm to fork. It buys wheat for Aashirbad atta, one of the most successful brands in market. With already in branded garment business, it plans to enter cotton procurement to forge linkages between fibre and fashion.

It is a story of a commercially viable way to reach 600 million villagers that forms the bulk of the total Indian consumers. Already 37 companies including biggies like Godrej Group sell their products through the e-choupal. These products range from tractors to soaps to hair oil. ITC charges a fee from every user company. By 2010 the turnover of the e-choupals is likely to log over Rs 9,000 crore.

E-choupal's speed and spread have also created resentment among mandi functionaries in Madhya Pradesh who perceive ITC's participation as interference on their turf.

This the growth model that will chaange the face of rural India.