Prasanta Paul

INFORMATION technology has the potential to provide the wherewithal to make a decisive difference to those segments of society beyond the two million directly engaged in the IT industry.

Seems an utopian statement taken straight from a mark book on IT? Not quite so; instances of IT contributing in a big way to drum up demand in the rural economy in much-abused India are taking the world by surprise. Close to 73 per cent of the Indian population is dependent on agriculture and agri-related industry for employment and a sustainable growth model of IT as also for the country can be devised without including this segment.

The tobacco major ITC Ltd’s electronic infrastructure (e-choupals), company’s pioneering click and mortar initiative, is the lone illustration of use of IT in the world as a strategic business tool in remote rural parts to boost business and expansion and upgradation of the "mandi" infrastructure.

Starting with just six e-choupals in June 2000, this ITC model has already become rural India’s largest internet-based initiative, covering as of today over 1,200 e-choupals linking 6,000 villages and serving nearly a million farmers. "It is ITC’s strategic intent over the next decade to create a low-cost IT-based interactive transaction and fulfillment channel to cover one lakh villages, representing one-sixth of rural India reaching out to millions of farmers," says ITC Chairman Y C Deveshwar.

The company which has been establishing almost four e-choupals a day, each at a cost of around Rs 3 lakh, would be spending more than Rs 300 crore in the next six/seven years for leveraging its business.

And Mr. Deveshwar provides an explanation for that too: "ITC’s investment in such an e-infrastructure creates abiding value for the farmer. In turn, this infrastructure also places my company in a unique position of trust with the farming community as a reliable supplier of goods and services on the one hand and as a buyer of high quality, cost effective farm output on the other, thereby supporting its own competitiveness."

The model, an illustration of creative application of IT, can foster international competitiveness, which in turn, may result in the "digital dividend" of sustainable value creation.

Besides, in facilitating a direct marketing channel in competition with the existing mandi system, it is in conformity with the reforms recommended by the Shakarlal Guru Committee appointed by Ministry of Agriculture and compared to the conventional model where the effectiveness of extension service is severely limited by the capability of the individual extension worker, the e-choupals enable a quantum improvement in the cost and quality of extension services.

The rationale behind ITC’s foray into this virgin territory is quite simple. Faced with a steep fall in cigarette sales (about eight per cent in volume in the current year), ITC has been fiercely diversifying into non-tobacco segments and agri-business, it has identified, is one of the key areas for growth.

ITC’s agri-business turnover was Rs 1,000 crore in the last fiscal and the number of e-choupals which was around 800 in 2001-02, would go up to around 1,450 in the current fiscal as the company is pegging a turnover of Rs 1,600 crore in 2002-03 in the agri-business.

Even as these choupals have the potential for extended use after a little modification, that ITC will be using this advantage to the hilt, is obvious.

According to the company chief of agri-business, Mr. S Sivakumar, ITC has been mulling over introduction of financial products through this channel. Among the initial products that might come through this include life and non-life insurance ones.

Elaborating on this, he says the company would first start with life insurance products followed by non-life. "This will be introduced in 50 chosen villages on a revenue-sharing basis," he says, but declined to elaborate whom ITC would be partnering for its foray in the insurance business.

How does e-choupal model leverages IT? Mr. Deveshwar details them: a) to deliver real time information and customised knowledge to improve farmers’ decision making ability and thereby better align farm output to market demands and secure better quality, productivity and improved price recovery; b) to aggregate demand in the nature of a virtual producers’ cooperative and thereby access higher quality farm inputs and knowledge at lower cost; c) to set up a direct marketing channel virtually linked to the mandi system for the purpose of price discovery, and at the same time, eliminating wasteful intermediation and multiple handling.

It reduces transaction costs and makes logistics efficient.

The manifold advantages of such an IT enabled, market led business model are many and the same could trigger "a virtuous cycle of higher productivity and enlarged capacity for farmer risk management, leading to higher order investments." A simultaneous growth in rural income is certain to unleash the latent demand for industrial goods.

However, Mr. Deveshwar made it clear that the company, through its foray into the villages for realising quality output, has no intention of dictating production target to the farmers nor is keen to get into a number of business.

"By merely working as the representative of farmers, we intend to build a trade marketing and distribution superhighway and preside over the flow of goods and services in the coming years to leverage our core business," he clarifies.

Thus, no wonder the e-choupals have fascinated overseas analysts of ITC who must noted with surprise the company’s ability to beat recession in its unique way. And it is no mean business for an Indian MNC when it is approached by the World Bank to render consultancy service for replicating the "e-choupal mode" in African villages for triggering faster growth.

"We declined the offer since we have just started this few years ago and are yet to ensure total coverage in our own country which is quite important," he points out. On top of this, a case study on this ITC model is being done by an expert for presentation at the Harvard University.

That ITC is still in the process of upgrading the model is borne out by its chairman’s frank admission: "The task of adapting the e-choupal concept for different crops and regions continues to test my company’s entrepreneurial capabilities. I may have overstated my case if I have carried any impression that such an endeavor… is a cakewalk. There are many constraints like infrastructural inadequacies including power supply, telecom connectivity and bandwidth, apart from the challenge of imparting skills to the first-time internet users in remote areas of rural India."

Like  the  ad  which   states there is no full stop after ITC, the company hasn't  stopped  its   efforts  in  working  out  innovative solutions for overcoming those constraints.