ITC e - Choupal

Report Submitted By-

Shinjan Bhattacharya - 2019228

Lohith Kumar - 2019197
Christina Fernandes- 2019199
Carla Martins - 2019196
Pranav Panyam - 2019218
Advait Mane - 2019192
 History of ITC
Established in 1910 as the Imperial Tobacco Company of India Limited, the company was
renamed as the Indian Tobacco Company Limited in 1970 and further to I.T.C. Limited in
1974. The periods in the name were removed in September 2001, and the company was
officially renamed as ITC Ltd.
Market leader
ITC is a leading FMCG marketer in India today, the second largest hotel chain, the clear
market leader in the Indian Paperboard and Packaging industry and the country's foremost
agri-business player.
IBD (International Business Division)
Set up in 1990, IBD leveraged ITC’s agri-business competency to promote export of
agricultural commodities. Over time, IBD later forayed into the domestic Indian market
with wheat products. Within two years of its launch, its domestic flour brand Aashirvaad
became the foremost flour brand in India.
Birth of e-Choupal
- Up until 1998, IBD contributed about US $112 Million to ITC’s annual turnover of US
$1.9 Billion.
- Being a part of the archaic government regulation of Agriculture Produce Marketing
Committee (APMC) made things painfully slow and grossly inefficient.
- According to the APMC, Agri-companies could only buy agriculture produce through
designated markets called ‘mandis’ and exclusively through registered commission
agents
- The distance to the mandis put pressure on the farmers to sell the produce at any price
- Moreover, the middlemen would skim away most of the gains suffocating the
procurement process for ITC
- ITC realized that the key to its international competitiveness was inextricably linked to
the competitiveness and competence of the entire value chain
- Thus, the then CEO of the IBD, started e-Choupal.
- e-Choupal helped ITC eliminate wasteful intermediation and multiple handling costs –
ITC saved on transportation cost and the farmers became wealthier

Transactional Costs Traditional E-Choupal

Trolley Freight to Mandi /ITC 120 120

Labour 50 0

Incurred by Farmer Commission 150 0

 Handling Loss 50 0

Commission to agent 100 50

Cost of Gunny Bags 75 75

Freight to Factory 120 0

Handling at Hub 40 40
Incurred by
Processor Cash Disbursement Costs 50

Total 705 335

The e-Choupal delivery framework was structured in order to provide farmers with the
following:
1) A Website (echoupal.com) was developed in multiple languages to provide farmers with
the knowledge and real time relevant information, for example, what seeds to use and
when to use it and assistance on how to use it.
2) Kiosk managers knows as Sanchalaks were elected to assist farmers in assessing prices.
The sanchalaks acted as an interface between the computer terminal and the often-
illiterate farmers. The farmers had to make a decision on whether to sell the produce to
ITC or to try other mediums for a better price.
3) The IBD processing centres known as ‘Choupal Sagaars’ were set up as an alternative
to mandis. A Choupal Saagar usually catered to about 40 Choupals. This ensured timely
payments to farmers. Traders were absorbed into the model as Samyojaks who
coordinate and manage logistics and locations.
Benefits of e-Choupal
- Better flow of information and knowledge about the price of produce.
- Flexibility in time to sales, hence resulting in low transportation cost.
- Scientific Inspections methods were adopted.
- Transparency and Structured framework in payment delivery.
- Eliminations of non-value-added activities.
- Improving the quality and quantity of the produce.
- Reducing Freight Costs
- The farmers saved 50% of the transaction costs while ITC paid 20% less than what it had
in the pre e-Choupal days.
 Diversified Services of e-Choupal
 Primary Education - Providing digital content and virtual training sessions for children
 Women’s Empowerment - Empowering partnership by providing women information
and market linkages
 Healthcare Services - Three-tier Choupal Health Care model
Tier One: The Choupal
Tier Two: The Choupal Saagar
Tier Three: The Network Hospital

Additional Services of e-Choupal

 Retailing via Choupal Saagar - ‘rural hypermarkets’ stocking products from over 110
companies
 Financial Product Marketing
 Kisan Credit Card - to provide cheap credit to rural farmers through State Bank of India
 Third Party Loans - to furnish third-party loans and offer credit services via delivery
channels
 Channel Credit - to provide more secure loans
 Insurance - to design weather insurance products according to crop, district and phase

Challenges
 Power cuts in rural areas can run for 8-10 hours hence, e-Choupal computers could not
always be accessed when information was needed. This was solved by installing Solar
panels.
 Phase imbalances lead to damage of equipment. Telecommunication infrastructure in
villages is poor.
 Telephone exchange also had limited battery backup. In addition, there was no local
support staff to maintain or troubleshoot telephone exchanges.
 Illiteracy rate was high in rural areas
 The selection of a reliable and matured farmer as a Sanchalak
 Improper knowledge about rural market.
 Vicious circle of intermediaries (Adatiya & Brokers).
 Improper and complex user interface on e-Choupal.
 Mistrust about inspection, testing and weighing of produce on centres.

Weaknesses
 Although e-Choupal helps eliminate the middleman and therefore allows farmers
to get a better price for what they grow, it does nothing to solve the more
fundamental problem of the inherent inefficiencies created by so many tiny farms.
 In addition, it relies on infrastructure, which is often lacking in rural communities.
  Electricity and telecommunication services can sometimes be less than 100 percent
reliable in some of the places where e-Choupal has been implemented.

 Finally, although there is no longer a middleman, e-Choupal can be no more

effective than the sanchalak (coordinator) in each community

Way-Forward

• ITC is targeting 10 million farmers in e-choupal network by 2022

• ITC is also going forward to expand its portfolio by adding fruits, vegetables and sea
food in processed, frozen or dehydrated forms, competing directly with existing
retailers and new age grocers such as Amazon Fresh.