Contents Sl No 1 2 Name of the Topic ITC e-Choupal : An Introduction ITCs Supply chain of Soya bean before e-Choupal Initiative

3 ITCs Supply chain of Soya bean after e-Choupal Initiative 4 5

RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

Page No

Synergies for ITC Critical Analysis of ITCs Supply Chain Comparison with Hariyali isan !a"aar #uture of e-Choupal Conclusion $eference

6 7 8 9

Supply Chain Analysis of ITC e-Choupal

3

1. Int o!"ction

e-Choupal is an initiative by the large agriculture processing company% the Indian Tobacco Company to e&uipped the rural mass with computer and technology so that they can prepare themselves to handle various challenges such as fragmented farms% wea' infrastructures and most important a number of intermediaries( The core ob)ective of the initiatives was to bring efficiency to the procurement process of ITC which lead to empowerment and sustainability of the rural farmers( The e-Choupal initiatives directly lin' the rural farmers with the company for the procurement of agriculture and a&uaculture products% such as soya beans% coffee% and prawns( Traditionally% these commodities were procured by ITC from the mandis *ma)or agricultural mar'eting centers in rural areas of India+% and a number of intermediaries was involved in buying the produce from farmers and moving it to the mandis( !ut with the e-Choupal initiatives the
RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

farmers are can directly negotiate the sale of their product with ITC( ,ith the IT infrastructure the farmers are able to access various information such as the demand and the rate in the mandis% farming practices in addition they are also able to place their order for the agriculture input products *fertili"ers% seeds etc+( This access to information helps farmers in improving the &uality of produce and obtaining better prices( -lected from the village itself% a literate farmer acts as the interface between the illiterate farmers and the computer(

Supply Chain Analysis of ITC e-Choupal

#ac$g o"n!
ITC incorporated on August ./% 0102 under the name of 3Imperial Tobacco Company4( In 015/ it was reorgani"ed in the name of 3ITC 6td4( It is one of the Indian companies to feature in 3#orbes A-list4 for .22/ and featured in #orbes .222 list( It has topped in certain values: Sustained value creation *!T-Stern Stewart survey+ 7perating profits Cash 8rofits

The ITC groups of company have a turnover of $s 5(9 billion yearly( It has a significant presence in various verticals such as tobacco and cigarettes% paper pac'aging% hotels and

tourism% IT and agricultural e:ports( ITC procures various agricultural products such as soybeans% coffee and oil seeds for e:port purpose( The supply chain involve for these product is very much comple: and involvement of a number of players( The farmers sold their produced to the small traders 'nown as 'achha adat and they sales it to the larger traders 'nown as pa''a adat( This pa''a adat ta'es the produced to the local mandis where they trade the products with the large traders and ultimately by the bro'er ITC procure the products( This long supply chain result to high procurement price for ITC and in lost profit opportunities for the farmers( 7n the other hand because this long supply chain is very time-consuming system% its also results in deterioration in the &uality of the products(

RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

The e-Choupal concept was introduced by ITC in ;une% .222( The-Choupals in the villages were converted to e-Choupals by setting up the re&uired IT facilities such as computers and internet connectivity( Initial investment of $s( /2%222 was done for e-Choupal formation with dial-up connectivity( In some cases the <SATs were installed with an investment of $s(022%222( The concept was build on a core value to involve the farmers of the village with e-Choupal in every aspects such as operation% maintenance etc( 7ne Sanchala'% an educated farmer of the village% was elected among the farmers of the village for the operation of the e-

Supply Chain Analysis of ITC e-Choupal

3

Choupal( He acts as an interface between the computer and the illiterate farmers% and retrieves information on the behalf of the farmers( The ITC covers all the cost for the setting of the e-Choupal and the Sanchala' bears all the operational costs such as electricity% internet charges etc( A Sanchala' spends around $s( 9222- $s( =222 per year for running of the e-Choupal( 7n the return the Sanchala' is paid a commission of 2(9 > per ton of processed products( Apart from the above ITC spends around $s( 9222 every year for the maintenance of the e-Choupals( The ITC also provides formal trainings to the Sanchala's for operating the e-Choupal( The farmers are able to access various information from e-Choupal includes crop prices% weather% scientific farming practices% farmer peer groups% and soil testing services( All the information are provided in hindi language for the farmers so that they can easily understand the messages( The farmer carries a sample of his produce to a local 'ios' and receives a spot

&uote from the Sanchala'( If the farmer accepts the &uote% he can transport the produce directly to an ITC centre and get the payment within two hours( The ITC provides the transportation to the farmers to bring their produce to the Collection centres( The produce is weighed in modern weighbridge with accuracy( Apart from that ITC reimbursed the transportation cost to the farmers( If a farmer is in very remote area he has an option to sell the produce to the Sanchala'( !y this system the farmers are able to avoid the hectic procedures in the local mandis where there is no accuracy of measurement% chances of damage of the produce% late payments and other unavoidable issues( The intermediaries are not removed from the chain instead they have become a essential part of the chain 'nown as Samayo)a's * coordinators+ who assists ITC in establishment of the e-Choupals buy field survey and other activities( They manage the physical transportation of sales made at the eRURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

Choupal% collect price data from local auctions% and maintain records( These coordinators earn a 0 percent commission on product processed(

2. ITC%s
Supply Chain Analysis of ITC e-Choupal

S"ppl& chain of So&a 'ean 'efo e e(Cho"pal

Initiati)e
ITC ?roups International !usiness @ivision *I!@+ was started in 0112( This division is engaged in e:ports of a wide range of agricultural commodities( It contributes almost A2> of ITC ?roupBs total foreign e:change earnings( ITC-I!@ has developed a focused approach on strengthening its core competencies in some of selected commodities( Today% ITC-I!@ continues delivers agri-commodities li'e #eed Ingredients - Soyameal% #oodgrains - $ice *!asmati C Don !asmati+% $apeseed Eeal% ,heat C ,heat 8roducts% 8ulses% Coffee% !lac' 8epper% -dible Duts - Sesame Seeds% H8S ?roundnuts and Earine products li'e Shrimps and 8rawns( The largest e:port of ITC-I!@s is soybean meal *a rich source of protein+ which are e:ported to the animal feed mills around the world% competing with several transnational trading companies% mainly from the FSA% !ra"il% and Argentina( The traditional Supply chain for Soya bean was as bellows before the e-Choupal initiative of ITC

' akka A&tiya #R egistere& Dealer%

Agri-Input C ompanies Dealer/ S tockiest R etailer

* ra&er

Money !en&er

F armer

+roker

ITC -IB D
Agril University, Met Dept, Insurance C o. ! " #o$ Dept o$ Agriculture%

RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

( acc)a A&tiya #Un-R egistere& Dealer%

-fficient bac'ward lin'age is essential for any e:porting company in the competitive global mar'et( !ut e:isting supply chain for soybean procurement through mandi was a bad e:perience for ITC- I!@( The cost factor was not at all favour of farmers or ITC( In this whole process cost incurred by farmers and ITC can be depicted as bellow(

Supply Chain Analysis of ITC e-Choupal

#armer incurs *$s per ET+

Trolley freight to Eandi 6abour accha Adtiya Handling 6oss

G0.2 G92 G092 G92 Total GH52

8rocessor Incurs*$s per ET+

accha Adtiya Cost of ?unny !ags *net+ #rieght to #actory Handling at Eandi

G022 G59 G0.2 G/2 TotalGHH9

Total*$s per ET+

G529

*Source: Seminar on Bottom of the Pyramid and CSR, IIM-K, Sept. 24, 200 !

s e c o r '

This analysis was the first trigger point for re-engineering the whole supply chain% the idea that was conceived by ITC as they were thin'ing of reducing overall supply chain cost to become more competitive compared to other mar'et players(

2.1. *h& ITC tho"ght of e(Cho"pal

As per the case study written by chain( a. The Tactical Impe ati)e
RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

uttayan and $ao of The Fniversity of Eichigan !usiness

School *.22H+ there were three reasons for which ITC thought of re-engineering the Supply

ITC%s !istance f om +a me , As there was no direct interaction of ITC with farmers ITCs 'nowledge about crops% suppliers and hence supply ris'% control on &uality of product was very limited

-ail& p ice inflation , Eostly the "dtiya# buy both good and bad &uality at different price throughout the day and sell it to ITC by mi:ing both the &uality at a single price and hence ITC had a very little command over &uality(

Supply Chain Analysis of ITC e-Choupal

Seasonal p ice Inflation, As last days mandi price acts as benchmar' price for ne:t dayI most of the times "dtiya# inflate the price for a prolonged period and in the process overall seasonal procurement prices of ITC shoot up(

Capt" e of Int a(!a& P ice shifts, ITC provided the "dtiya# a price range for a day to buy within( If agents average buy price within the day is less ITCs given price then he sold to ITC at their price and poc'eted the whole benefit( If the agents average buy price within the day is higher than ITCs price he bought it but the Adtiya stored it and sold it it to ITC very ne:t day at higher price( In this process Adtiyas too' the whole benefit of intra-day price shifts

'. The St ategic Impe ati)e

,ith globali"ation and opening up of Indian mar'et in early 12s several competitors li'e Cargil% 7lam International etc( entered Indian mar'et that had better margin-to-ris' ratio because of wider options for ris' management( Hence in 011= ITC tried to address the following advantages that were en)oyed by their competitors .o i/ontal sp ea! - 8resence in do"ens of countries allows customer pro:imity and a diversified supply base 0e tical p esence J Integration allows companies to e:tract supply-chain efficiencies 1is$ management J 7perating in countries where financial and logistical institutions to manage ris' lowers the cost of bearing ris's
RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

To address hori"ontal integration deficiency% ITC heavily ban'ed upon IT and hence the idea of e-Choupal was conceived% a customi"ed IT application and realignment of business goals and processes to manage ris' and build ITCs 'nowledge base( c. The Social Impe ati)e ITC thought of the long-term development of rural India as competitive supplier and buyer of a range of goods and services( Hence ITC ban'ed upon e-Choupal venture

Supply Chain Analysis of ITC e-Choupal

Indian distribution channels are marred with inefficiencies emanating from a rigid bureaucracy C improper infrastructural support for the various sta'eholders( Decessity being the mother of invention goes the line C that was )ustified by ITC-I!@s uni&ue initiative that aimed at integrating the interests of all the sta'eholders minus the impediments of an inefficient supply chain(

3. ITC%s

S"ppl& chain of So&a'ean afte

e(Cho"pal

Initiati)e
An analysis of the supply chain post re-engineering

Illustrating the benefits in terms of cost ta'ing the same soyabean e:ample% we arrive at the following figures

#armers Incurs *$sKET+ 8rocessor Incurs *$sKET+

RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

Trolley #reight to ITC Hub Commision to Sanchala' Cost of ?unny !ags *net+ Storage and Handling at Hub Cash @isbursement Costs Total cost of Chain

$s 0.2 $s 92 $s 59 $s /2 $s 92 $s HH9

Supply Chain Analysis of ITC e-Choupal

!est 8ractices followed by ITC at each stage of the supply chain a. P icing 8revious days closing price used to determine benchmar' price for a given day This info and previous day mandi prices communicated to sanchala' through eChoupal portal( @aily mandi prices fed by commission agents into the portal Sanchala' inspects the sample that farmer brings to him% assesses &uality and ma'es deductions *if any+ to benchmar' price% gives farmer a conditional &uote !enchmar' price represents upper limit on &uoted price If farmer decides to sell to ITC% sanchala' gives him a note J nameKvillageK&uality testsKappro:( &uantityKconditional price

'. 2"t'o"n! 3ogistics #armer proceeds to the nearest ITC procurement hub with the note Some procurement hubs are ITC factories% others are purely warehouse operations ITCs aim is to have a processing centre within H2-/2 'm radius of its farmers

c. Inspection 4 g a!ing
RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

Sanchala' does the first inspection as a visual inspection% and inspect for foreign matter% moisture content

Conditional pricing is based on this At the ITC procurement hub% laboratory tests are conducted on a sample of farmers produce

The tests are conducted after the sale% price is not altered To change farmers attitude and appreciating produce &uality% ITC is developing lab tests to reward farmers with reward points for better &uality supply

Supply Chain Analysis of ITC e-Choupal

!. *eighing 4 pa&ment #armers produce is weighed on electronic weighbridge He is then given full cash payment #reight e:penses are reimbursed Appropriate documentation at each stage and farmer is given a copy of that Samyo)a's handle cash operations

e. ."' 3ogistics

#armer transports his produce to the nearest processing centre or storage hub ITC incurs the transportation cost The farmer bears the ris' of transportation until produce is delivered and the sale is completed

f. Technological S"ppo t
RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

Dodal platform catering to commodity blending% agricultural trading% e-choupal Crural distribution ./%222 personali"ed business function points 002%222L pre-built business function points Integrated !usiness Systems for @irect Agriculture 8rocurement% $ural @istribution% e-Choupal Eanagement% -:ports% Insurance% A&ua 8rocessing C Commodity blending !uilt-in commission calculation engines Fsage of pre-built components for 6ogistics% Sales% #inancials Support for = local languages

Supply Chain Analysis of ITC e-Choupal

3.1. The #enefits that acc "e! to ITC '& "se of technolog&
+"nctions e-Choupal management @iverse !usiness 8rocesses #enefits Single window for monitoring and controlling all Sanyo)a' and Sanchala' through e-Choupal Standardi"ation across product groups and also meeting the diverse re&uirements

8roductivity Stoc' Information Control of Subcontracting operation

7n time finance boo' closure Eulti-level stoc' visibility across enire supply chain <isibility of subcontract operation for a&ua

3.2. 5 6in(6in !eal

+a me gains !etter info content !etter info timing 6ess transportation costs Transaction duration ,eighing accuracy 8rofessionalism

ITC gains @isintermediation savings #reight costs Muality control $is' management

RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

Supply Chain Analysis of ITC e-Choupal

3

#armers benefit from more accurate weighing% faster processing time% and prompt payment% and from access to a wide range of information% including accurate mar'et price 'nowledge% and mar'et trends% which help them decide when% where% and at what price to sell( #armers selling directly to ITC through an e-Choupal typically receive a higher price for their crops than they would receive through the mandi system% on average about .(9> higher *about FSNA per ton+( The total benefit to farmers includes lower prices for inputs and other goods% higher yields% and a sense of empowerment( The e-Choupal system has had a measurable impact on what farmers chose to do: in areas covered by e-Choupals% the percentage of farmers planting soy has increased dramatically% from 92 to 12> in some regions% while the volume of soy mar'eted through mandis has dropped as much as half( At the same time% ITC benefits from net procurement costs that are about .(9> lower *it saves the commission fee

and part of the transport costs it would otherwise pay to traders who serve as its buying agents at the mandi+ and it has more direct control over the &uality of what it buys( The system also provides direct access to the farmer and to information about conditions on the ground% improving planning and building relationships that increase its security of supply( The company reports that it recovers its e&uipment costs from an e-Choupal in the first year of operation and that the venture as a whole is profitable(

4. S&ne gies of e(Cho"pal 6ith ITC%s othe '"siness 4.1. Sta$ehol!e anal&sis of ITC e(Cho"pal
RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

P ima & Sta$ehol!e s

Inte est

#armer Community

Supply Chain Analysis of ITC e-Choupal

Access to information J -mpowered decisions J Improved agriculture -conomic benefits through lower transaction costs and process efficiencies Served with dignity nowledge bundled sale of goods and services Co-opted in product design Hope for a brighter future 6ower procurement costs @irect interaction with farmers - Control on &uality C supply security 6ow cost distribution channel Access to mar'et intelligence gain access to global mar'ets through ITC and commission to compensate some of the loss revenue $ Pa%%a

ITC

Commission Agents *Kachha "datiya# "datiya#+

4.2. 7n!e stan!ing the S&ne gies

VPN providing SCM, ERP

CRM capability

+ 5 1 8 9 1 S
RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

e-choupal rural two-way fulfillment capability

Ciga ette T a!e 8a $eting capa'ilit&

E xpanded FMC G distribution capability

8 5 1 : 9 T S

Branded Foods

Lifestyle retailing

Education Stationery

Matches & Agarbattis

A basis for strategic partnerships w ith other FMCG brand ow ners

ITCs e-choupal initiative stands as a classic e:ample of CS$ i(e of corporate strategy lin'ing business purpose to larger societal purpose( It is acting as a catalyst with alignment with the farmer in transforming the scenario of Indian rural mar'et( It is not only providing access to latest information to them but also developing local leadership and creating profitable distribution( #rom the companys point of view it is improving the supply chain by reducing the procurement cost% improving &uality and traceability( ITCs strategic intent is to promote e-choupal as a significant two wat multi dimensional channel which can efficiently carry goods and services out of and in to the rural India(The networ' of A9222 e-Choupal centres spread across /2222 villages has become an outlet to various agri-commodities li'e wheat% soyabean% rice% a&ua-products% mai"e etc( The reverse flow carries #EC?% durables% automobiles% ban'ing and insurance services in the rural areas( As of today ITC e-choupal is one of the top 9 alternate channels for 6IC policy sales amd is contributing to 02> of the total weather insurance mar'et in India(

Supply Chain Analysis of ITC e-Choupal

5. e(Cho"pal , 5 c itical anal&sis

5.1. *he e a e the efficiencies in e(Cho"pal net6o $;

3ast mile sol"tion 6ith lo6 cost, the effective web based innovative channel created by ITC made close interaction with farmers and ITC( Although this channel was primarily meant for procuring agriculture output from producers but later on ITC envisaged this channel to be utili"ed as distribution of other products to farmers li'e agriculture inputs% #EC? products etc( and needless to say this channel reduced the distribution cost of these products substantially because same channel is used for both
RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

farmers output and input and other necessary items( Fsing same logistics for large &uantity of product leads to economics of scale to the ITC( +"ll Se )ice app oach, instead of supplying agriculture inputs only as in traditional networ'% ITC sells these inputs with information( A chronic problem of Indian agriculture is application of fertili"ers indiscriminately without soil testing( --Choupal came out here with solution( It does sell all agriculture inputs with re&uired

Supply Chain Analysis of ITC e-Choupal

information through websites and services li'e soil testing at the doorstep of farmers( -eman! agg egation, one of the hurdles in the traditional distribution system is to serve farmers highly scatted in remote areas where physical infrastructure is a limitation( Here in ITC e-Choupal% sanchala' at village level collect the individual orders from farmers then aggregate it before pass on this order to hub( Thus this uni&ue system optimi"e the utili"ation of the system with the benefit of both farmers and ITC because farmers get products at discount price and ITC increases its margin by selling bul' &uantity at low price(

Thi ! pa t& selle , it is well established that there is huge untapped potential of rural mar'ets( $eali"ing this% --Choupal is selling various products of third party *e(g HF6+ who otherwise find difficulties in channeli"ing their products in traditional way( --

Choupal is thus creating a networ' for third parties to help them reach out scattered but potential customers in cost effective manner(

9<tensi)e "se of info mation technolog&, ITC e-Choupal is an innovative and probably the largest web based intervention in rural India( It eliminates the problem of 'nowledge gap of farmers% reduces the cost of mar'eting of both inputs and outputs( The whole system is also ma'es the entire supply chain transparent and speedy(

RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

5ccess to info mation a'o"t c"stome s, traditional system relies upon village level agent% retailer to gather information on needs% buying behaviour% income pattern etc( due poor coordination among various channel partners% access to re&uired and authenticate information is very limited( --Choupal here has a solution to this problem( Sanchala' being from the same village has vast 'nowledge about customers( ,hen all the sanchala's collect information from their respective villages% company gets very reliable and correct information for a particular area% conse&uent upon which it can formulate plan to achieve its mar'eting ob)ectives( -ssentially the whole system

Supply Chain Analysis of ITC e-Choupal

eliminates the problem of poor coordination and channel conflict among various channel partners(

P"ll 'ase! st ateg&, the e-Choupal mechanism educates farmers about best practices and understand what inputs he need and why it is needed( It leads to a desired pull forces from customer for the products( Thus as opposed to pushing strategy% it eliminates the cost of advertisement to convince the farmers(

5.2. - i)e s of S"ppl& chain of e(Cho"pal

Info mation, information on price of produces at different mandis% availability of inputs% management crops etc is disseminated very smoothly using web based technology( 7t ma'es farmers to be attached with e-Choupal and transact through it(

3ogistics at ."', scientific weighing machine% good pac'aging system% resting place at the hubs are the core competencies of e-Choupal system(

T anspo tation, as hubs are located near to the villages it is easy for the farmers to get their produce there by bulloc' cart( So locational advantages has enhanced the efficiency of choupl supply chain(

RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

Sto age facilities, ITC has sophisticated and scientific storage structure at the hub from where produce is transported to processing centre(

Capacit& of sto age facilities, big storage structures at ITC hub managed by s'illed persons are instrumental in ma'ing the entire chain viable(

Conscio"s a'o"t ="alit&, ITC always emphasi"es on &uality of the farmers produce( #ramers get report on &uality of his produce( It helps farmers to enhance the &uality of their produce which in turn increase value addition to the chain(

Supply Chain Analysis of ITC e-Choupal

5.3. *ho a e in p o'lems 'eca"se of e(Cho"pal

2pe ation of 8an!i, scale of operation of e:isting mandis under A8EC act is substantially reduced( It is losing revenue in the form of ta: which in turn impedes the infrastructure development of these mandis( In many places these mandis have become redundant with the replacement by e-Choupal( Th eat to man!i la'o" e s, many mandi labourers who were engaged in various value addition activities li'e weighing% bagging% grading lose their )obs due diversion of products from mandi to ITC hub( #a//a nea man!is, mar'et near the mandis is also reported to be losing sales as farmers selling at hub purchasing their essential items from choupal sagar ad)acent to the hubs(

Th eat to the e<isting p ocesso s, there are large number of unorgani"ed processors who were procuring from farmers% are now facing problem of acute shortage of raw material as farmers are now selling their produces at hub for better prices and services( It is indeed threat to the small scale processor in long run(

5.4. 1is$ associate! 6ith e(Cho"pal

9 o!e! po6e of commission agents, the commission agents operating in mandis are very powerful with respect to controlling price in favour of buyers( ,ith e -choupal in place their activities reduced to managing activities at hub( The margin they earn at
RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

hub is also low compared to what they were earning from mandis( It triggers an unease relationship between commission agent *samyo)a'+ and ITC which can possible be threat to ITC as other competing players can cash in on this unease relationship(

Inte "pte! c"stome

Se )ices, empirical studies shows that despite good

coordination among sanchala' % samyo)a' and ITC processors% still there is grievances

Supply Chain Analysis of ITC e-Choupal

among sanchala's with regard to timely supply of inputs% information etc( this problem interrupt the continuous flow of services provided by e -choupal(

5.5. C itical
+ ame6o $

anal&sis

"sing

555

0al"e

Chain

5nal&sis

5gilit& > This refers to the drives need for fle:ibility in supply chain when there is increasing sources of uncertainty 5!apta'ilit&( This refers to the way supply chain needs to fit in the changing needs when there are challenges li'e changing need for productKmar'etKtime

5lignment- This refers to alignment in differential interests of multiple players when there is a trend towards distributed supply chain

RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

Supply Chain Analysis of ITC e-Choupal

6. Compa ison 'et6een e(Cho"pal an! .a &ali :isan #a/aa 6.1. #"siness 8o!el of .a i&ali :isan #a//a
H ! is an initiative from @SC6% a leader in agri-input sector in India( H ! is a pioneering pro)ect as it contributes to rural and agricultural development while being a profitable business venture( -ach H ! centre caters to communities within a .9-H2 'm perimeter and impacts the life of about .2%222 households( H !s business model is to provide targeted services to farmers in remote regions( It also reinforces the need for farming communities to have access to information and technology( At present% there are H2. stores of H ! in eight

states vi"--F(8% $a)asthan% 8un)ab% Harayana% Chattisgarh% Eaharashtra% E8 and A(8% and also there is plan for e:pansion in these states(

RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

HK HK B B

-ach H ! outlet has a &ualified ag onomist which provides technical advice for cultivation of various crops( These agronomists help the farmers to cultivate crops which are fetching good return in the mar'et and farmers get great moral support to go for any crop without hesitation or ris'( In 8un)ab% farmers are going for intercropping of Eoong with Cotton which has helped them in increasing their income by $s5922-=222 per acre( H ! has also contributed in increasing yield by giving farmers improved seed varieties( In F8% farmers are now getting more yields by using hybrid paddy seeds( 7n an average they are getting 02 &uintals more paddy per acre(

Supply Chain Analysis of ITC e-Choupal

RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

6i'e ITC e-Choupal% H ! is also providing 'nowledge about mandi prices and commodity futures to the farmers( #armers are also provided with ATE access( H ! is also creating local employment by training local youths which then provide information and 'nowledge of high return crops(
New B as e of pyra id! odels

Supply Chain Analysis of ITC e-Choupal

"ariyali # is aan B a$aar

-t)er S ervices

' rocurement )u0 F inancial S ervices R etailing F arm Inputs -ut put + uy0ack -ut put "are)ousing -utput F inance

R etailing C onsumer .ealt), , oo&s / &ucation

Agri S ervices

' lat $orm $or multiple service provi&ers

In the above system H! is in integration with ICICI ban' for providing financial help to the farmers(

Loan for pass through to farmers

Other companies Extension service

Repayment of loan with interest

Produce procurement

RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

The model is very much similar to e-Choupal% e:cept that whatever is procured from the farmers are given to the companies who in food processing as ITC is into this business in contrast @SC6 is not doing that as it not in the food business(

6.2. Compa ison

Supply Chain Analysis of ITC e-Choupal
e(Cho"pal .a &ali :isan #a/aa

Eain ob)ective farmers Synergies

8rocurement % mar'et information

$ural $etail by trained agronomist with what @SC6 is

!enefit to the computer application to provide provide better method of cultivation

Synergies with products which Synergies ITC is manufacturing

selling*inputs to agriculture plus other services .2-.9 'm area coverage

-conomies scale

of .9-H2 'm area coverage

8rocurement centre

near small town

Strategically placed near petrol pump mainly

7. +"t" e of ITC e(Cho"pal

Initial success of e -Choupal showed how technology can be used in remote hinterland to change the rural economy where timely and authentic information is limited( It is indeed and reengineering the e:isting supply chain to safeguard the interest of all the sta'eholders( -Choupal is now envisaged to bring more benefits in deprived rural mar'ets( !oth customers
RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

and corporate can leverage upon it in future in following ways Sp ea! of technolog&, e-Choupal is instrumental in ma'ing villagers particularly student technology enabled( Students get their documents printed from choupal saving time and visit to nearby towns( Sanchala's are now connected with not only domestic price but also price movements in international mar'ets( This is for sure will enhance the 'nowledge base of farming community and improve the decision ma'ing power(

Supply Chain Analysis of ITC e-Choupal

5ccess to c e!it, access to timely credit at low cost is thrust areas of government policy( The concerns here is effective and suitable distribution networ' to provide credit to the needy farmers( In future e-Choupal is e:pected to address this problem in following ways a+ --Choupal can reduce the transaction and administration cost of credits( b+ !an's can touch informal sector which is crying for credit needs( c+ Instead of providing credit in cash% financial institution can provide credit in 'ind with tie up with input mar'ets to minimi"e the unproductive use of credit( d+ Sanchala' is the best person to tell about clients credit history% amount of credit needs% fle:ible repayment etc( in this way sanchala' helps ban's designing suitable loan products(

e+ There is lot of opportunity to tie up with ban's% input competition to ta'e this intervention in new height( 5)aila'ilit& of ins" ance p o!"cts, micro insurance is increasingly being tried out in rural areas but problem with this product is lac' of awareness% affordability% availability and acceptability( --choupal can be utili"ed to usher the micro insurance mar'et in rural areas in following ways a+ 8roduct designing part will be &uite easy for the insurer once they receive actual information on insured% the ris' associated with% previous insurance e:perience etc( b+ There can be tie up between ITC and insurance agency with respect to collection of
RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

premium but it must be at the convenience of farmers c+ There is greater opportunity for weather insurance to be sold through e-Choupal $enewal of premium will be easy as sanchala' in his choupal can trac' on status of premium of every client through website d+ The web based technology can be used to pay premium ma'ing it simple and speedy

Supply Chain Analysis of ITC e-Choupal

3

7.1. e(Cho"pal )e sion 3.?

The concept 3e-cChoupal4 has able to reach four million farmers in a period of si: years *.222-.22A+ and ITC has a vision of reaching 022 million farmers in ne:t few years( $ecently it has come up with the version H(2% which is a bundle of innovative services to the farmers( !ut there is reason why ITC has come up with version H(2% 3The core business of sourcing the commodities directly from farmer was restricted by the government as it has a speculation that the concept may endanger the farmers interest both economically and socially( As a result the whole sale price was hi'ed up and the inflation reached two digit numbers(4 !efore discussing about the version H(2% here we have tried to do a comparative analysis of the two previous versions(

Pa amete s I!ea

0e sion 1.?@ the sta tA

0e sion 2.?@ the scale("pA

The concept gave a power of scale to !y .22A% /2%222 villages covering / the small farmers by aggregating them million peoples( as sellers * of produce + and as buyers * of farm inputs +

+a me %s gain

The farmers get bargaining power and a opportunity of have choice

RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

Information on weather% price etc nowledge on farming methods% soil testing etc 8urchase of seed% fertiliser to insurance #armers sell crops to the ITC Centers cattle care% water harvesting

ITC%s gain

Access to inputs for its agri ITC was able to procure businessI offer the use of networ' to fresh commodities at other companies reasonable prices from the farmers

Supply Chain Analysis of ITC e-Choupal

3

0e sion 3.? In version H(2 of e-Choupal concept% ITC has tried to integrate various verticals of the farmers need( The strategy is to deepen the e-Choupal concept in the rural area and cover the ma:imum number of the farmers in short time( ITC has given three core areas in version H(2 and they are%

aA Ne6 '"siness !e)elopment, In this strategy ITC added two new anchor businesses to e-Choupal and they are $ural )obs and employability * tied up with Eonster India+
RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

8ersonalised agri services plus strengthening e:isting commodity sourcing

'A 8o e inte actions, 3Choupal Sagar4 is the e:clusive rural outlet of ITC% where the farmers can access their desired products and the information on various products( !y this initiative various #EC? companies with agri-input companies are able to reach the rural mass which was earlier a myth( Apart from that ITC has tied up with D7 IA to provide appropriate infrastructure by mobile service so that dissemination of the information related to farming% pricing and other valuable information can be assessed by the farmers and enable communication between the farmers and the company(

Supply Chain Analysis of ITC e-Choupal

3

cA Ne6 technolog&, !y mobile phones the farmers will able to get the information related to their cropping pattern% price etc( The uni&ue feature of this facility is that the farmers will get c"stomise! se )ice as per their need(

8. Concl"sion

ITC e-Choupal is serving the dual agenda by bridging the rural isolation and the resulting disparities of education and economic opportunity% while simultaneously creating a potentially large profit opportunity for the organisation willing to tac'le the inefficiencies( The model shows how a large corporation can blend a social mission and an ambitious commercial venture that it can contribute in rationali"ing the mar'ets and increasing the efficiency of agriculture system( The model is also shows how Information Technology in bringing transparency% increasing information( -merging areas li'e telemedicine% e-?overnance% education and entertainment will soon included in the gamut of service of e-Choupal networ'( The model e:emplifies sustainable convergence of apparently contradictory ob)ectives of shareholder value ma:imi"ation and creation of social wealth( It is the core tenet that drives and is crucial to the scalability of the model( The pro)ect started in Eadhya 8radesh *Central
RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

India+ with a pilot of A choupals *village community 'ios's+ in ;une .222% and as of today% is scaled up to 9/22 choupals across A states *E8% F8% arnata'a% A8% Eaharastra% $a)asthan+ reaching H%922%222 farmers engaged in 0. agri-commodities in H9222 villages( ITC eChoupal% with its digital infrastructure and associated human and organi"ation capacities built% has already become rural Indias largest Internet based intervention and is surging towards the vision of servicing 022%222 villages by .202 reaching out to 02 million farming households(

Supply Chain Analysis of ITC e-Choupal

3

#rom .222-2/% ITCs mar'et share went up from => to 0.>% the transaction costs came down from => to .> and the farmers price reali"ations went up by .2 to .9> through better price discovery% low wastages% yield improvements and new trading contract formats( The eChoupal system gives farmers more control over their choices% provides a transparent process% a higher profit margin on their crops% access to information that improves their productivity and above all respect and fairness for the local people and communities(

9. 1efe ences
http:KKplanningcommission(gov(inKreportsKsereportKserKstdyOictK/Oe-choupal>.2(pdf www(dscl(comK!usinessOAgreeOHar is!"r(asp:P8I@G.5 http:KKwww(farmingfirst(orgK.221K2=Khariyali-'isaan-ba"aar-developing-rural-businesses-inindiaK http:KKwww(caseplace(orgKd(aspPdG.1/H http:KKwww(business-standard(comKindiaKnewsKharyali-'isan-ba"aars-to-go-nationalK.99AH9K

RURAL MICRO ENTERPRISE: Scope and Success in Enhancing Livelihoods

Supply Chain Analysis of ITC e-Choupal