S. Sivakumar is chief executive of the International Business Division ITC Ltd, a tobacco and FMCG company. Mr Sivakumar is credited with creating the e-Choupal, an online e-Commerce portal that provides agri-business for farmers. In e-Choupal, farmers use the Internet to leverage transmission capabilities and access market and weather data.

Apart from this, ITC-IBD is engaged in the trading of agri-commodities.

Mr Sivakumar topped the MBA class of 1983 from the Indian Institute of Rural Management in Anand, Gujarat. After graduating from IRMA, Mr Sivakumar worked for a farmers' co-operative in Gujarat for six years before joining ITC in 1989.

A voracious reader and a keen music enthusiast, Mr Sivakumar is also a director on the boards of National Bank for Agricultural and Rural Development, ITC Infotech India Ltd., Agro Tech Foods Ltd and the Centre for Collective Development.

Excerpts from an interview with Santosh Singh:

Question: With 6,000 e-Choupals and 10 choupal sagars up and running across the country, what will be the focus for ITC-IBD this fiscal?

The focus will be to increase the scale and expand the scope for e-Choupals and other businesses. Our efforts will centre on refining the business model. About 1,000 e-Choupals - it costs between Rs 1 lakh-Rs 3 lakh to set up an e-Choupal - and 40 Choupal Sagars, which cost Rs 5 crores each, will be added this fiscal and cover new States such as Punjab, Haryana and Uttaranchal. Choupal Sagars will be set up in Maharashtra, Karnataka and Andhra Pradesh. The new initiatives that are planned are an entry into the horticulture business and moving into social infrastructure sector such as health and education.

What is the logic behind expanding the scale and scope of operations when the margins in the business are wafer-thin?

I agree that the margins are wafer-thin but it should be noted that we operate in a business that involves upfront cash for investments. Moreover, profits are not immediate and investments are decided keeping the long-term goals in mind. In the next three years e-Choupals will show profits and margins will be expanded in the business. Having said that, let me mention that the agri-business on the whole is profitable but till the e-Choupals begin making money, we have to depend on the traditional businesses for revenue, such as commodity trading in wheat, rice, tobacco and aqua-culture.

There were also proposals for setting up e-Choupals abroad. What is happening on that front?

Multilateral agencies and co-untries from South and South-East Asia, Africa and Latin America evinced interest and had approached us for an international foray of e-Choupals but right now the need for expansion of the project in India itself is very high.

The reality is that the per capita income for a farmer is only one-fourth that of his urban counterpart. And ITC's vision for India is to reach 1,00,000 villages. We have only covered only 40 per cent of the journey. Therefore, e-Choupals won't be replicated in other countries in the next four-year years.

Coming to the global commodity market, how do you see the market moving this fiscal after a crash in prices in May?

Volatility in commodity prices is an integral part of the market. But agri-commodity crashes are not huge as metals. Wheat prices are high right now and are likely to stay high with the government floating global tenders for fresh stock. Vegetable oil and pulses' price will also remain high. To protect our operations from price shocks, we hedge on commodity prices. On an average one-third of the trade in any segment is hedged when volatility is high. The guiding factor for prices is the monsoon. But now farmers have a lot more resilience to the monsoon with drip irrigation and other such tools. Moreover, weather insurance is emerging as an appropriate financial instrument to deal with this risk.

Would you also be looking at tying up with partners and selling financial products to farmers through e-Choupals?

We are selling insurance products to farmers and are considering Mutual Funds also. But MFs will take some time as the concepts need to be understood. Life and general insurance are a popular choice with health, weather and crop insurance topping in the latter segment. For weather insurance, ITC has a tie-up with ICICI Lombard and Iffco-Tokio General Insurance and crop insurance is sold through Agriculture Insurance Corporation. Weather and crop insurance is gaining acceptance as the farmers' risk has to be minimised, given the uncertainty of nature and monsoon. Currently, insurance is sold through 1,500 e-Choupals and the target is to cover 6,000 e-choupals this year covering Uttar Pradesh, Madhya Pradesh, and Rajasthan.

What is happening to the proposal of agriculture call centr-es in Yavatmal, Maharashtra?

We are behind schedule by a year as far as agriculture call centres are concerned. The pilot in Yavatmal should be operational by the end of this fiscal once the requisite standards are clear and the national e-governance plan falls into place. In agriculture call-centres we are looking at people who can add value, not just wage arbitrage. The key to this initiative lies in knowledge value addition of rural India. Keeping this in mind, we have begun training students in Class VIII and IX in Maharshtra as part of our education pilots.

What's the target growth ITC-IBD is targeting this fiscal?

We have business worth Rs.2600 crore at this point. For fiscal 2006-07 this figure should see a growth of 30 per cent.

Any plans of joining the carbon trading bandwagon?

We do have plans for carbon trading but that wont be as big as ITC PSPD's venture. The plans are still in the nascent stage and we intend to tap the solar power projects in 6,000 e-Choupals for carbon credits. The audit process has been completed but the tonnage figures have not been arrived at yet.