By S. Sivakumar

(The author is Chief Executive Agri Business, ITC Ltd)

For several reasons, a large majority of the people living in rural India got locked into a low income – low expenditure vicious cycle. Serving these markets would firstly mean creating conditions for higher incomes for these people, rather than engaging in competitive marketing to get a larger share of their small wallet.

ITC’s pioneering e-Choupal initiative is leveraging the real power of IT to transform the agricultural economics of rural India. This novel interactive transaction & efficient fulfillment channel virtually integrates the farm-produce value chain to plough back a larger share of the consumer spend to the farmer. Coupled with the distribution processes tailored to meet the needs and challenges of consumers at the bottom of the economic pyramid, the e-Choupal assets turn into a competitive & modern marketing infrastructure for rural India. There is assured potential for scaling up the model is because of its ability to enmesh the corporate objective of creating shareholder value with the social aim of alleviating poverty.

The e-Choupal idea cuts through the basic and historic problems crippling Indian agriculture: the fragmentation of agricultural land holdings, the difficulty of access to those holdings, high levels of illiteracy, all of which make agricultural extension work unviable, making it difficult and daunting to adapt and apply the findings of laboratory research to agricultural cultivation.

e-Choupal makes use of the physical transmission strengths of the current intermediaries – the only efficient option in the context of India’s weak infrastructure, making them an integral part of the value chain. Yet, by using the real-time multicasting ability of Internet, these intermediaries are bypassed to deliver information and market signals directly to the farmer to enhance the long-term competitiveness of Indian agriculture.

Under e-Choupal, ITC has set up Internet kiosks in villages. These kiosks are managed by the farmers, selected from within the community and trained, known as ‘sanchalaks’. At the kiosks, the sanchalaks help the farmers readily access the different agricultural crop-specific websites that ITC has created in the relevant local language. The farmers can learn on-line the best farm practices for their crop, the prevailing prices and price trends for the crop in the Indian and world markets, the intricacies of risk management, and the local weather forecast. The smallest individual farmers thus get the benefit of expert knowledge on the cultivation of their crop. e-Choupal leverages the seamless workflow capabilities of IT to virtually integrate several best-in-class players along the chain and offer the services on a single platform to every farmer.

The farmers can order quality agricultural inputs on-line. Virtual aggregation of such demand effectively reduces the cost of these inputs, again bringing the power of scale to even the smallest of farmers.

e-Choupal links the Indian farmer to the consumers in local and global markets, by leveraging ITC’s time-tested and proven competencies in branding, marketing and distribution. Unlike in the alternative mandi channel (where farmer discovers the price for his produce after he has incurred costs of transportation, therefore ends up selling even if he is not happy with the price), e-Choupal helps the farmer to take an informed and empowered decision (because the price is known in the village itself). In the process many non-value-adding activities like multiple transportation & handling, bagging etc., otherwise inevitable in the traditional supply chain, are eliminated, ploughing back a larger share of the consumer’s pie to the farmer.

Thus, through the virtual vertical integration (V2I) model of supply chain management (SCM), e-Choupal secures the scale benefits for India’s agricultural economy without displacing the small farmer.

On the ground, e-Choupal is proving to be a unique 3-D marketing channel for many products & services consumed by rural India.

The changes sweeping the marketing discipline in the backdrop of the increasing consumer-centricity of today’s world are well known. For example, while superior products and distinctive functional benefits are the necessary starting point for success in the marketplace, the experiential dimension is becoming a critical differentiator. Process benefits – which make transactions between buyer & seller easier, quicker, less expensive and more pleasant – support this dimension. A third dimension, personalisation, now successfully employed by a few marketing companies, will be the only sustainable differentiator in tomorrow’s world. Relationship benefits – which reward the willingness of consumers to identify themselves and to reveal their purchasing behaviour – lay the foundation for this dimension.

The organic blending of relevant knowledge (e.g. application) and customized information (e.g. local weather), with farmer’s purchase transactions, is creating a unique value for him, especially in farm inputs. The sanchalaks connected to the market, leading farm input companies and experienced agricultural scientists through the e-Choupal infrastructure, are able to deliver this benefit to the farmer by leveraging the power of collaborative networks, previously unthinkable in rural India.

A couple of other important process benefits that e-Choupal is delivering to the marketer are (a) superior demand forecasting & real-time communication with the help of sanchalaks and the IT infrastructure, especially valuable in FMCG as well as short-window-demand products, (b) the ability to assemble groups of highly involved customers for credible and focused research as well as to demonstrate product features. This is proving to be a boon in consumer durables.

By virtue of its wealth enhancing capability, e-Choupal has been able to build valuable and sustainable relationships with farmers who constitute the majority of rural consumers. As the relationships transcend short-term expedient considerations, these people share a wealth of information about themselves, which is then converted into valuable knowledge to market tailor-made credit and insurance products.

Emerging areas like telemedicine, eGovernance, education and entertainment will soon ride on the Internet, web-casting and video conferencing infrastructure of e-Choupal.

The Roadmap notwithstanding the Speed Breakers:

The e-Choupal Project, launched in June 2000, has today become the largest Internet-based corporate intervention in rural India. e-Choupal’s network today reaches out to more than a million farmers in over 11,000 villages through 2,100 e-Choupal kiosks that ITC has set up across four states – Madhya Pradesh, Karnataka, Andhra Pradesh and Uttar Pradesh.

The hurdles that ITC encountered while setting up and managing these e-Choupals relate primarily to the inadequacies in infrastructure in rural India: lack of power supply, telecom connectivity and bandwidth. Imparting computer usage skills to first time Internet-users in the remote areas of rural India is proving to be another daunting proposition.

ITC has been evolving several alternative and innovative solutions to overcome these challenges: for instance, arranging back-up power through batteries charged by solar panels, upgrading telephone exchanges with RNS kits, installing VSAT equipment, introducing mobile-Choupals, local caching of static content, enhancing efficiency in streaming-in dynamic content, and setting up a distributed 24x7 helpdesk infrastructure.

ITC has worked closely with farmers in designing and managing the entire e-Choupal initiative. The active participation of farmers in e-Choupal has created a sense of ownership in the project among the entire farming community. Farmers view e-Choupal as the new age cooperative.

Encouraged by this enthusiastic response from farmers, ITC has planned to extend the e-Choupal initiative to 11 other states across India over the next seven years. ITC’s vision is to extend this interactive transaction and fulfillment channel to cover 100,000 villages, and reach out to 10 million farmers growing a range of agricultural products.

"I brave the volatile global markets"- Nagappan, coffee planter, Coorg, Karnataka: ITC’s ‘plantersnet.com’ Web site enables Indian coffee growers like Nagappan ride out the volatility of the international coffee market. The site provides him with comprehensive updates on international prices from commodity exchanges like CSCE in New York and LIFFE in London. Coffee planters can also comprehend trends, trading ranges and chart patterns from customised fundamental and technical analysis by experts. Growers can also determine quoted raw coffee prices at international auctions from the ‘Parity Chart’ and the ‘Calculator’ provided on the site. ‘Tradersnet’, a special link on the site, brings a large number of coffee planters, traders and roasters together in a virtual market, providing ample opportunities to discover the most attractive prices.

"Come to my village and I will show you how ITC is changing world"- Abhishek Jain, e-choupal Sanchalak, Dahod Village, Madhya Pradesh: ITC’s e-choupal project has radically changed the way of life for Abhishek and thousands of soyabean farmers like him. Till yesterday, they did not know whether it was going to rain or shine in their village. Nor did they know how to realise the best price for their produce. Today, they have internet kiosks available virtually next door. In the very first full season of e-Choupal operations in Madhya Pradesh, soya farmers sold nearly 50,000 tonnes of their produce through the ‘soyachoupal’ Internet platform. The volume sold has doubled since then.

"I never knew what fair price was till ITC came to my village"- Ram Chander Pal, wheat farmer, Tabukha, Uttar Pradesh: For years, wheat growers like Ram Chander had no incentive to improve the quality of the wheat they produced. Farmers cultivate wheat across several agro-climatic zones in India and consequently produce varying grades of the grain. The traditional wheat procurement and handling system does not efficiently match the quality of produce with the specific needs of different markets. Consumer taste preferences in various markets demand their own kinds of wheat. With the introduction of e-Choupal, the situation is changing. Farmers now have the benefit of efficient price discovery and the facility of selling wheat to ITC right at the farm gate. ITC leverages its comprehensive proprietary knowledge base of consumer behaviour and customised product development to link the farmers’ produce to appropriate consumer segments. ITC’s e-Choupal thus sets right the ‘disconnect’ between the way wheat is bought (according to physical properties), processed (according to chemical properties) and sold (according to consumer tastes). In effect, guaranteeing farmers the right price for the right quality.

"I have no fear of uncertainties"- Mani Raju, Patavala, East Godavari District, Andhra Pradesh: ITC’s ‘aquachoupal’ has come to the rescue of Indian aqua farmers such as Mani Raju whose livelihood is riddled with uncertainties. It helps aqua farmers deal with the threats posed by undetected virus, soil contamination and abnormal levels of salinity – anyone of which could ruin an entire shrimp crop. Given the international buyer’s concern for food safety, aquachoupal also enables the farmer to access comprehensive know-how on safe practices, such as the correct use of antibiotics, hygienic washing, sanitised dressing and air-tight packing, at every step of shrimp farming. Risk management has added a new value dimension to the economics of aqua farming, directly benefiting hundreds of farmers such as Mani.

Conclusion:

As the Chairman of ITC, Mr. Y.C. Deveshwar, has pointed out in a speech: "Growing competitiveness of Indian agriculture induced through such a market led business model, can trigger virtuous cycle of higher productivity, higher productivity, higher incomes, enlarged capacity for farmer risk management, higher order of investments, feeding even higher quality and productivity. On the other hand growth in rural incomes would also unleash the latent demand potential for industrial goods so necessary for the continued growth of Indian economy. This creates another virtuous cycle snowballing the economy into a higher growth trajectory".

ITC is planning to extend its integrated watershed development programme and holistic community development programmes to all the villages covered by the e-Choupal network. The consequently cascading economic multiplier effect will be really extraordinary. Thus, ITC’s pioneering e-Choupal movement exemplifies the economic power of the synergy between the corporate sector’s creation of shareholder value with the development of India’s agricultural economy.