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.
e-Choupal, the V2I SCM Model:
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.
e-Choupal, the unique 3-D marketing
channel:
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.
Coffee Calculator-
"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.
Season of soya-
"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.
Way of the wheat-
"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.
Fishing for a livelihood-
"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.
