ITC | Innovations from India

NETWORKING FOR INDIAS FARMERS

Faced with supply chain inefficiencies in its foods business, ITC, one of Indias largest diversified business groups, decided to tackle the problem by removing information asymmetries by leveraging the Internet. In the process, ITC created an online network for more than 4 million farmers in India. The project spans across 30% of all states in India, with more than 5,000 information centres set up. ITC plans to extend the project to at least half of the total number of states in India and quadruple its reach among farmers.

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Innovations from India | ITC

TC, one of Indias largest industrial groups with interests in the food business, was facing a number of challenges across its raw material supply chain. Issues such as fragmented farms, weak infrastructure and multiple layers of middle men (such as traders, brokers, etc.) created inefficiencies across all levels of the supply chain. It is estimated that such issues lead to a loss of 30 to 35% of Indias total perishable food production. In terms of value, this amounts to a loss of USD 13 billion. To deal with this, ITC decided to set up an initiative through which it could not only manage its efficiencies, but also deliver sustainable value to all members of the supply chain. ITC started the e-Choupal (loosely translated as electronic gathering places or electronic village squares) initiative in the year 2000, with the soya farmers of the central Indian state of Madhya Pradesh. An e-Choupal centre consists of a personal computer (PC) and the necessary hardware for information access. It is installed in the house of a trustworthy member of the village, who is known as the sanchalak (translated as operator). Then there are hubs which have been set up for the collection and selling of produce by farmers. At the hubs, there are people known as samyojaks. These are ITCs representatives who are responsible for purchasing the produce at the hub.
Key Features

Farmers getting to know the innovative

e-Choupal

The e-Choupal initiative has a number of features. It provides access to information on weather forecasts, market prices, news affecting agriculture, etc, and gives details on best practices in farming and risk management. It also provides information on sources from where agricultural inputs and consumer goods should be purchased, and offers marketing opportunities for the sale of agricultural produce. The project has been systematically structured with each e-Choupal centre catering to about six villages. The centres are gener-

The e-Choupal initiative has reached 10 Indian states & currently benefits 4million farmers.

ally within walking distance (about 5 km), while the hubs or the sale/collection points are located at about 30 km from any village. The cost to ITC for each e-Choupal is approximately USD 3,250 for hardware, and an additional USD 3,250 for training and maintenance over a one-year period.
How e-Choupal Works

The system embraces some innovative methodologies to address both the farmers and the companys concerns, such as: Infrastructure support. The firm owns and deploys electronic workstations (PCs) in

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ITC | Innovations from India

the houses of the sanchalaks. The sanchalak is selected by ITC, but he/she should be approved of by the villagers. The sanchalak also takes a public oath to provide non-discriminatory access to the workstation. Information aggregation. The company consolidates and makes available information from sources such as the Indian Metrological Department (IMD), local markets and government agricultural extension programmes. It also provides details on input supplies such as seeds, fertilisers and chemicals. ITC gets a marketing fee for providing details on input supplies from the firms who market their products on the e-Choupal network. Transparent buying processes. Once the farmer decides that he/she would like to sell to ITC, the sanchalak immediately issues a contract to the farmer for delivering his/her produce to the ITC hub. Less hassles and improved margins for farmers. The farmers benefit by selling to ITC, since they get fixed prices for the produce (based on quality and grade of produce), immediate cash payments and reimbursements for transportation cost. Rewards all stakeholders. The sanchalaks and samyojaks earn a commission on the purchase and on the sale of agricultural inputs and other consumer goods to the farmers.
Lower Costs, Higher Revenues for All Stakeholders

In the e-Choupal initiative, the workstation is installed in the house of the sanchalak of the village, and it has a number of features. It provides access to information on weather forecasts, market prices, news affecting agriculture, etc, and gives details on best practices in farming and risk management.
through ITCs initiative. On an average, a farmer receives an additional USD 6 per metric ton of produce (i.e. about 2.5 per cent higher in revenue from every unit of produce). Additional revenue opportunities. It is expected that the network can help ITC generate about USD 20 million in additional enterprise value, through the sale of ITC goods and services to farmers, such as cooking oil, salt, sugar, flour, lamps, etc. Growing network. Since the beginning of the e-Choupal initiative in 2000 in one state, the initiative has reached 10 Indian states. Under the initiative, close to 6,500 eChoupal systems have been deployed. These can be accessed by 4 million farmers in 40,000 villages in India. The company is in the process of rolling out a new version of the e-Choupal system by 2012. Under the new version, ITC plans to offer personalised crop management advisory services to individual farmers, integrate mobile phones into the digital and physical network of e-Choupal, along with some other value-added features. The move to connect the e-Choupal network with mobile devices will enable farmers to provide information about crop conditions (such as the type of soil, the type of crops grown, the date of sowing a crop, etc.) on an ongoing basis to ITC. Subsequently, this data will be processed by ITC to give farmers specific advice. With this enhanced vision, ITC plans to increase its current reach from 4 million farmers to 20 million farmers in the current network area.
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The impact of this initiative has been very encouraging and has been felt across a number of key parameters: Lowered costs for buyers and sellers. e-Choupal initiated mediations have helped to reduce transaction cost by six per cent for both buyers and sellers. Lowered costs for ITC. The initiative helps to save about 2.5 per cent on the net procurement cost. This is attributed to savings realised from fewer commissions and travel cost disbursements. High revenue realisation for farmers. Farmers have reported higher earnings

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