Echoupal

E-Choupal is an initiative of ITC Limited (a large diversified group in India) to link directly with rural farmers for the procurement of agricultural/aquaculture produce like soya, coffee, and prawns. EChoupal was conceived to tackle the challenges posed by the unique features of Indian agriculture, characterized by fragmented farms, weak infrastructure and the involvement of numerous intermediaries. Traditionally, these commodities were procured in 'mandis' (major agricultural marketing centres in rural areas of India), where the middleman used to make most of the profit. These Middlemen used unscientific means to judge the quality of the product, to set the price,difference in payout for good quality and inferior quality was less and hence, there was no incentive for the farmers to produce good quality yield. With e-choupal, the role of the middleman is eliminated.

ITC Limited has now established computers and Internet access in key rural areas where the farmers can directly negotiate the sale of their produce with ITC Limited. The PCs and Internet access at these centres enable the farmers to obtain information on mandi prices, good farming practices and place orders for agricultural inputs like seeds and fertilizers. This helps farmers in improving the quality of produce, and also helps in realizing a better price. Each ITC Limited kiosk having an access to Internet is run by a sanchalak—a trained farmer. The computer housed in a farmer’s house is linked to the Internet via phone lines or by a VSAT connection and serves an average of 600 farmers in 10 surrounding villages within about a 5 km radius. The sanchalak bears some operating cost but in return gets commissions for the e-transactions done through his eChoupal. The warehouse hub is managed by the middle-men called samyojaks. The samyojak acts as a local commission agent for ITC Limited.

Due to the eChoupal services, farmers have seen a rise in their income levels because of rise in yields, improvement in quality of output and a fall in transaction costs. Even small farmers have gained too. Customized knowledge is offered to the farmers despite heterogenity. Farmers can get real-time information despite their physical distance from the mandis. The system saves procurement costs for ITC Limited. The model is quite different from the other models, as the farmers do not pay for the information and knowledge they get from eChoupals. The eChaupal model runs without any subsidy. There is no government money involved in this project. ITC Limited has extracted value in four steps:
(a) elimination of non-value added activities;
(b) differentiating product through identity preservation;
(c) value added products traceable to farm practices;
(d) e-market place and support services to future exchange.

One of the success factors is ITC Limited’s managerial competence to execute a complex project and manage cost. The ITC Limited bottom line is – roll out, fix it, and scale it up. The principle of the eChaupals is to inform, empower and compete.

There are 6,500 eChoupals today. ITC Limited is adding 7 new eChoupals a day and plans to scale up to 20,000 eChoupals by 2012 covering 100,000 villages in 15 states, servicing 15 million farmers. Transactions through these eChoupals may rise to about US $ 2.5 billion by 2010.

Other Links and References

* [http://harvardbusinessonline.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=604016 HBS Case on ITC eChoupal Initiative]
* [http://www.digitaldividend.org/case/case_echoupal.htm E-Choupal Case Study]
* [http://www.itcportal.com/ruraldevp_philosophy/echoupal.htm E-Choupal]
* [http://youtube.com/watch?v=Fx4gukMYTGA E-Choupal on youtube]