SEMINAR TOPIC: ITC E- CHOUPAL

INTRODUCTION In the contemporary India, various forces are at work to change the affect of agriculture extension in India, hitherto perceived as a process of technology transfer [research centers to farmers] to a process of facilitating a wide range of communication, information and advocacy services which are demand driven, pluralistic, sustainable and decentralized. In the midst of this change, extensionists are grappling with the question of how best to harness Information and Communication Technologies [ICTs] to improve the quality of life for millions of farmers/ farm families. A silent communication revolution is sweeping across rural India where people are using new communication technology such as mobile telephones and browsing internet for a variety of purposes. The number of such users may be small or insignificant at the moment but the very fact that rural people have taken up these new alternatives holds great promise for agriculture and rural development strategies and policy planners, in fact it has been made possible by the recent advances in the ICTs gradually expanding telecommunication infrastructure and motivated services providers. The communication theories and strategies have also taken note of this transformation and evolved new initiatives to harness the potential of ICts for agriculture development. Various public sector as well as private corporation institutions has come forward with innovation ideas and strategies. The initiation of Choupal strategies network is one of them. The e-Chou pal is one of the ICT based private agency which is provision inputs and extension service in the field of agriculture. e-Choupal is an initiative of Indian Tobacco Corporation (ITC) Limited (a large Multi Business Conglomerate in India) to link directly with rural farmers for procurement of agricultural/aquaculture produce. e-Choupal was conceived to tackle the challenge posed by the unique features of Indian agriculture characterized by fragmented farms weak infrastructure and the involvement of numerous intermediaries. ITCs Agri Business Division one of Indias largest exporters of agricultural commodities has conceived e-Choupal as a more efficient supply chain aimed at delivering value to its customers around the world on a sustainable basis. e-Choupal also unshackles the potential of Indian farmer who has been trapped in a vicious cycle of low risk raking ability, low investment, low productivity, weak market orientation, low value addition. Such market led business model can enhance the competitiveness of Indian agriculture and trigger a virtuous cycle of higher productivity, higher income and enlarges

capacity for farmers risk management larger investments and higher quality and productivity. e-Choupal is a Hindi word which means village meeting place. Market is meeting place where sellers/ customers come together to do the transactions. The v is a virtual market place where farmers can do the transaction, facilitated by an internet linked computer, directly with a purchaser and can realize better price for their produce. The e-Choupal is a unique web-based initiative of ITC Limited [a large multi business conglomerate in India] offering farmers required information, products and services they need to enhance farm productivity, improve farm-gate price realizations and cut transaction costs. Farmers can access latest local and global information on weather, scientific farming practices as well as market price at the village itself. It also facilities supply of high quality farm inputs as well as purchase doorstep thereby saving them time and transportation costs. Basically, an e-Choupal is a desktop computer with internet access, housed in a small room, costing under three lakhs to set up and about Rs 10,000 annually to maintain. The e-Choupal also providers daily need items manufactured by ITC. Launched in June 2000, e-Choupal has already become the largest private sector initiative among all Internet-based interventions in rural India. e-Choupal services today reach out to more than 40 lakh farmers growing a range of cropssoyabean, Coffee, wheat, rice pulses, shrimp- in over 40,000 villages through 6450 kiosks across 8 states [M.P., Karanataka, A.P., Maharastra, Rajjastan, Uttarakhand and Tamil Nadu]. It has future plans to cover 100,000 villages or one sixth of rural India, within a decade. UNIQUE FEATURES OF E-CHOUPAL The e-Choupal model has been specially designed to tackle the challenges posed by the unique features of Indian agriculture, characterized by fragmented farms, weak infrastructure and the involvement of numerous intermediaries among others. The e-Choupal also unshackles the potential of Indian Farmers who has been trapped in a vicious cycle of low risk taking ability. e-Choupal directly links with farmers for procurement of agriculture produce like soybeans, wheat, coffee and Prawans. Traditionally these commodities were procured in mandi [major Agricultural marketing centers in rural areas], where the middleman used to make most of the profit. These middlemen used unscientific means to judge the quality of the product to set the price. Difference in price for good quality and inferior quality was less and hence there was no incentive for the farmers to invest and produce good quality output. With e-

Choupal, the farmers have a choice and the exploitative power of the middleman is neutralized. ITC has now established computers and Internet access in rural areas across several agricultural important regions of the country, where the farmers can directly negotiate the sale of their produce with ITC. A personal Computer [PC] with Internet access at these centers enable the farmers to obtain information on mandi process, good farming practices and place orders for agricultural inputs like seeds and fertilizers. This helps farmers in improving the quality of produce and also helps in realizing better price. Each e-Choupal is run by a sanchalak [facilitator] who is a trained farmer or a youth of the village. The computer is linked to the Internet via phone lines or by a VSAT connection and 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 services 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 their reorganized role. BENEFITS OF E-CHOUPAL The e-Choupal system gives farmers more control over their choices a higher profit margin on their crops and access to information that improves their productivity. By providing a more transparent process and empowering local people as key nodes in the system. ITC increases trust and fairness. The increase efficiencies and potential for improving crop quality contributing to making Indian agriculture more competitive. Despite difficulties from undependable phone and electric power infrastructure and sometimes limited hours of use, the system also links farmers and their families to the world. Some sanchalaks track future prices on the Chicago Boards of Trade as well as local mandi prices for advising the farmers about current trends in market. Village children have used the computers for school work, games and to obtain and print of their academic test results. The result is a significant step towards rural development. PRINCIPLE OF THE E-CHOUPAL The principle of the e-Choupal is to inform, empower and complete. At the same time ITC has also extracted value in four steps to make the model sustainable and scalable: 1] Elimination of non-value added activities. 2] Differentiated product through identity preserved supply chains.

3] Value added products traceable to farm, practices. 4] e-market place for spot transactions and support services to future exchange. One ITCs managerial competence to execute a complex project and manage the costs. ITC Limited adopted a flexible project and manage the costs. ITC Limited adopted a flexible project management approach called roll out, fix it and scale up to deal with uncertainties in a pioneering model. ADVANTAGES OF E-CHOUPAL e-Choupal has the advantages of their own market facilities for purchasing the farmers produce. Geographical distances do not restrict participation in the eChoupal. The main disadvantage of conventional market is that information asymmetry is inherent in the market whereas e-Choupal provides for transparent transactions. This enables the participation of smaller as well as large farmers. Elimination of some layers of intermediaries allows for large share of profits to reach the lower end of value chain. The main attractiveness of e-Choupal is that it can be used for connecting large producers/ small producers and small users/large users thereby eliminating the need for hierarchy of brokers/ middleman. Internet is used as a low transaction cost backbone for communication. Indian market has inadequate physical, social and institutional infrastructure that is substituted by intermediaries and they also value to the chain ion every step. The e-Choupal model demonstrates that a large business corporation can play a major role in recognizing rural markets and increasing the efficiency of an agricultural system, while doing so in ways that benefit farmers and rural communities as well as shareholders. The e-Choupal model also shows the key role of information technology provided and maintained by a corporation, but used by local farmers-in helping bring about transparency, increased access to information and rural transformation, critical factors in the apparent success of the venture are: 1] ITCs extensive knowledge of agriculture. 2] The efforts ITC has made to retain many aspects of the existing production system. 3] Including maintenance of local partners are treated.

PROBLEMS BEFORE E-CHOUPAL WAS INTRODUCED:

Traditionally, these commodities were procured in mandis (major agricultural marketing centers in rural areas of India), where the middleman used to make most of the profit. These middlemen used unscientific and sometimes outright unfair means to judge the quality of the product to set the price. Difference in price for good quality and inferior quality was less, and hence there was no incentive for the farmers to invest and produce good quality output. With eChoupal, the farmers have a choice and the exploitative power of the middleman is neutralised. ICT platform that facilitates flow of information and knowledge, and supports market transactions on line. 1. 2. 3. 4. It transmits Information (weather, prices, news), It transfers Knowledge (farm management, risk management) It facilitates sales of Farm Inputs (screened for quality) and It offers the choice of an alternative Output-marketing channel (convenience, lower transaction costs) to the farmer right at his doorstep 5. It is an interlocking network of partnerships (ITC + Met Dept + Universities + Input COs + Sanyojaks, the erstwhile Commission Agents) bringing the best-inclass in information, knowledge and inputs. e-Choupal is, thus, distributed transaction platform that brings together sellers, buyers along with information and service providers. e-choupal is a model with a number of non-conventional characteristics namely: 1. 2. 3. 4. 5. 6. 7. 8. customer centric capable of being used for many commodities and multiple transactions easily scalable once it is verified uses local talent and local people and develops local leaders can be extended to local as well as global procurers stimulates local entrepreneurs to extend their innovativeness uses all the existing institutions and legal frameworks and many others can join the market as transaction time is low.

CRITICAL SUCCESS FACTORS The e-Choupal experience highlights that ICT platforms can provide rural connectivity and e-commerce support. These platforms have enormous potential provided they are conceptualized for the specific needs of the community and business. Some of the elements that helped the e-Choupal to work successfully are discussed below:

 Comprehensive knowledge of rural markets: Rural markets are both economic and social networks and there is a strong connection between the operation of social and economic transactions. Understanding the operations is vital before the systems are conceptualized. Use of local population, as much as possible helped the network to get the acceptance closely. Designing a Win-Win transaction model: The success of eChoupal comes from the condition in which both the farmer and the processor share the benefits coming out of the elimination of middle men and hence due to timely information availability. Leveraging the logistics channels: The existing logistics of the rural markets are leveraged but they are not able to exploit the information asymmetry (unlike that in a conventional market). In that sense e-choupal uses the local institutions but eliminates the information asymmetry that they used previously. Selection of Sanchalak: Both the selection of Sanchalak and the acceptance of Sanchalak by the community are very critical for the success of e-Choupal. ITC used a trial and error method for developing the procedure for selecting Sanchalaks. In the platform terminology Sanchalak is the interface for maintaining the platform. For the farmer the Sanchalak is the e-Choupal. Training and sensitizing him for the crucial role has been the main reason for the acceptance of the Sanchalak by the farmers. Sanchalak, thus, acts as the coordinator of the knowledge community, and a representative of farming community. Evolving an appropriate user interface: The Technology interface used in rural areas has to be very simple. Interface has to be tried for rural settings and only after its validation it has to be used. Firstly, one has to understand the user pattern and secondly, it has to be tried, tested and validated. For example, farmers do not understand the concept of insurance. e-Choupal evolved a simple interfacing arrangement that a farmer can understand. Bottom-up model for entrepreneurship: e-Choupal encourages enormous amount of creativity at the local level along with local entrepreneurship stimulation. The farmer and Sanchalak are free to use the e-choupal and develop new uses. e-Choupal unleashes the creative spirit in the rural India. EFFECTS OF E-CHOUPAL ITC Limited has now established 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. The PCs and Internet

access at these centres enable the farmers to obtain information on mandi prices, good farming practices and place orders for agricultural inputs like seeds and fertilizers. This helps farmers in improving the quality of produce, and also helps in realizing a better price. Each ITC Limited kiosk having an access to Internet is run by a sanchalak a trained farmer. The computer housed in the sanchalaks house is linked to the Internet via phone lines or by a VSAT connection and 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 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 reorganised role. Indeed these middlemen make up for the lack of infrastructure and fulfill critical jobs like cash disbursement, quantity aggregation and transportation. Due to the eChoupal services, farmers have seen a rise in their income levels because of rise in yields, improvement in quality of output and a fall in transaction costs. Even small farmers have gained from the initiative. Customized and relevant knowledge is offered to the farmers despite heterogeneous cultures, climates and scales of production. Farmers can get realtime information despite their physical distance from the mandis. The system saves procurement costs for ITC Limited. The model is quite different from the other models, as the farmers do not pay for the information and knowledge they get from e-Choupals. The principle of the e-Choupals is to inform, empower and compete. At the same time ITC Limited also has extracted value in four steps to make the model sustainable and scaleable: 1. 2. 3. 4. elimination of non-value added activities differentiated product through identity preserved supply chains value added products traceable to farm practices e-market place for spot transactions and support services to futures exchange

One of the factors leading to e-Choupals success is ITCs managerial expertise in executing complex projects and managing costs. ITC Limited adopted a flexible project management approach called roll out, fix it, and scale up to deal with uncertainties in a pioneering model. There are 6,500 eChoupals today. ITC Limited plans to scale up to 20,000 eChoupals by 2012 covering 100,000 villages in 15 states, servicing 15 million farmers.