Executive Summary

for

Mid Term Assessment Study of

CSC Scheme:
April 2010

Prepared For:

Prepared By:

EXECUTIVE SUMMARY
The Government of India has formulated the National E-Governance Plan
(NeGP) with the vision of providing all government services in an integrated
manner at the doorstep of the citizen, at an affordable cost. The NeGP initiatives
with an outlay of Rs 22,600 crores consist of 27 Central, State and Integrated
Mission Mode Projects (MMPs) along with 8 other support components for rapid
introduction of e-governance in the country. The NeGP envisions a three pillar
model for delivery of web-enabled Anytime, Anywhere access to information
and services in rural India. These are:
a) Connectivity: State Wide Area Networks (SWANs)/NICNET
b) National Data Bank/ State Data Centres (SDCs)
c) Common Services Centers (CSCs)

The CSC is a strategic cornerstone of the National e-Governance Plan (NeGP),

approved by the Government in September 2006, as part of its commitment in
the National Common Minimum Programme to introduce e-governance on a
massive scale. This scheme aims towards rolling out about 100,000 rural kiosks
across India

The CSCs would provide high quality and cost-effective video, voice and data
content and services, in the areas of e-governance, education, health,
telemedicine, entertainment as well as other private services. A highlight of the
CSCs is that it will offer web-enabled e-governance services in rural areas,
including application forms, certificates, and utility payments such as electricity,
telephone and water bills.

Implementation of a mission-oriented project of this size, scope and complexity

poses significant challenges of project management at the national level as well
as opportunities to achieve significant economies of scale in the identification,
customisation and implementation of the content, services, physical and digital

infrastructure required for the project. Further, some of the potential citizencentric services lend themselves to aggregation at the national level. To enable
the state-specific implementation plans to benefit from such economies of scale,
aggregation of best practices, etc., at the program level, the Department of IT,
(DIT) Government of India has appointed Infrastructure Leasing & Financial
Services (IL&FS), as the NLSA of the CSC Scheme. The NLSA is currently
assisting the DIT, the State Governments and the SCAs.

At the second/middle level is an entity termed the SCA (loosely analogous to a

franchiser) to operate, manage and build the VLE network and business. On the
other hand the SDA notified by the State Government is normally a PSU/Society
or any other agency controlled by the State Government whose primary role is to
provide the necessary policy level support to the CSC Scheme on behalf of the
State Government. The SCA is selected and supported by the respective SDA
and has to be committed, financially strong and with adequate experience of
working with rural communities. This is essential since the CSC Scheme poses a
variety of complex new issues in terms of financing, channel management,
technology, integration with local community, etc.

Each SCA has to appoint a Village Level Entrepreneur, as per the norms set by
the DIT, at each of the location for running and managing the CSC. These VLEs
are recruited on the basis of their financial strength of the citizen, his/her
educational qualification, ability to run the CSC and meet the objectives of setting
up the CSC etc. Once the VLE is selected he/she is provided training on various
aspects depending upon the requirement. SCA is the only stakeholder who is
directly in touch with the VLEs

The State Government is responsible to set policy, regulatory and other relevant
matters at the State level. The State Governments are also taking appropriate
decisions on the mode and degree of integration with the CSC Scheme, of the

existing physical, digital and institutional infrastructure of various Government

Agencies/ Departments in the State, such as Schools, Gram Panchayats, Public
Health Centers (PHC), Post Offices (in consultation with GOI) etc.

Department of IT, Government of India, wanted to understand if the CSC

Scheme rollout has been taking place in the right direction and collect feedback
on the CSC Scheme from various stakeholders which are Village Level
Entrepreneurs (VLE), Service Center Agencies ( SCA), Citizens, Government
Agencies (GA), Local Level Intervening Institutions (LLII) and National Level
Service Providers (NLSP).

For this assessment exercise, IMRB International was asked to conduct a survey
among the stakeholders of the CSC scheme. This report is based on the findings
of the survey conducted amongst:
1. VLEs
2. Intervening Institutions (local level & NLSPs)
3. SCAs
4. State Designated Agencies (SDAs)
5. Village Heads
6. Government Agencies
7. Citizens
Across 19 states covered by 15 SCAs. A structured questionnaire was
administered to respondents across the above segments to capture their
experiences and views on different aspects related to the CSC Scheme.

1. SCA Profile & Key Programme Planning & Implementation

Issues
The SCAs operate through a structure that spans across national, regional,
district and block levels. Some SCAs have created a SPV for the CSC project.
They work through either a separate wing for the CSC project or include CSC as

a part of their e-governance vertical. These SCAs are from diverse backgrounds
including IT companies, NGOs, training institutes, CSR wing of corporate etc.
The type of organisation varies from NGOs (such as AID, NICT); IT companies
(CMS Computers Ltd, Tera software) to training Institutes (AISECT) and even
banks (J&K Bank). Some of the SCAs such as J&K Bank are working only in few
selected areas or a single state while there are other SCAs such as CMS which
are operating in multiple states. The total number of CSCs allocated per SCA
range from 220 CSCs (Tera Software) to 8118 CSCs (SREI). Leveraging their
existing network to effectively provide services was one of the key criteria
considered by SCAs while selecting the states. SCAs are mainly opting for a
pure franchisee model vis--vis the employee model as the employee model
requires a huge initial investment. Such type of experiments has resulted in a
refined CSC model which would help SCAs in their future endeavors.

Some SCAs feel that due to non-availability of G2C services existing as well as
prospective VLEs are losing interest in the initiative. Certain SCAs also think that
they are not able to provide more B2B and G2C services to the citizens due to
non-availability of Internet at majority of places. According to them, VSAT
connectivity and Data Card/USB connectivity do provide a satisfactory solution in
terms of speed/reliability but they are too costly and the VLE is unable to bear the
burden especially when he/she is not making enough money in the absence of
G2C services. Thus, presence of G2C services and reliable high speed internet
connectivity are expected to augment the growth of CSCs, fulfilling both its
commercial and social obligations

Geographical factors such as uneven/hilly terrain, factors such as Naxalite

menace and non-cooperation at the basic level of governance, i.e. the
district/block government official level, in setting up of CSCs are the other
concern areas cited by SCAs. Apart from this, SCAs have higher expectations
from the NLSPs (organizations at national level like banks, insurance companies,
etc. providing their services through CSCs) in terms of more meaningful services

suitable for rural masses, reduction in rates vis--vis those in urban areas and
affixation of a certain share for the VLEs involved in marketing related activities.

2.VLE Profile & Key Programme Planning & Implementation

Issues
The VLE is the key to the success of the CSC operations. While content and
services are important, it is the VLEs entrepreneurial ability and acceptability in
the society that would ensure CSC sustainability. The quality of service at the
CSCs would depend a great deal on the quality of VLEs.

10% of the VLEs were found to be female - this is a key indicator towards women
empowerment in rural areas. 84% belong to Socio Economic Profile of R1 (more
affluent sections of the society). The mean age of VLEs was found to be 36
years. VLEs were found to be well educated; 97% of the VLEs were at least
SSC/HSC passed. The challenge initially was to create awareness about the
scheme to find entrepreneurs who could do justice to the scheme. Newspapers,
relatives/friends and the SCA emerged as the top 3 sources of awareness about
the CSC scheme for VLE. This shows that initiatives were taken by the SCAs for
creating awareness and attracting more people for applying to become a VLE.

Out of 1727 villages visited, VLEs were available in 1097 villages (64%). In few
cases, VLEs themselves were not present and the CSC was managed by an
employee. In the same 1727 villages where CSCs were claimed to be set up by
SCAs, CSCs in 999 villages (58%) were open. Of the other CSCs, 90% were yet
to open while rest was shut down after operating for some time - mostly due to
inadequate traffic coming to them. In a few rare cases, the SCAs also terminated
the services. SCAs have admitted to this fact and some of them have requested
government to reduce the number of CSCs they were originally supposed to
open

The average Initial investment to setup a CSC was found to be almost

Rs.50,000.. Since in Gujarat, the employee model is being used via the eGram
VishwaGram project, the average investment was found to be lower as
compared to other states. SCAs now largely prefer the franchisee model. It was
found that less than 1 out of every 5 operational CSCs had some credit scheme
available for the initial investment. A little over half (55%) of the VLEs received
training from the SCA. Amongst them 68% were either highly satisfied or
somewhat satisfied with the training provided. Generally the SCAs have in-house
trainers who they believe have more knowledge of ground realities of the CSC
model and understand VLE concerns better. Training for the VLEs is a
mandatory feature across all SCAs and consists of induction training provided to
the VLE when he joins the CSC and training pertaining to the new services as
and when they are launched. Business model of CSC, the role of VLE,
entrepreneurial and managerial skills, basic computer fundamentals, customer
handling, etc. are the different aspects covered in training. Generally the VLE
does not have to pay any fees for training explicitly as it is covered in the initial
deposit most of the times, in some cases though the SCAs charge a nominal
amount. The NLSP directly trains the VLE in groups sometimes. The VLEs also
doubt the SCAs capabilities to deliver the planned services, to some extent.

For 45% of the VLEs, CSCs are the only source of income. As the income
through CSC increases (with improvement in condition like provision of G2C
services, internet, electricity, etc.), more and more VLEs will shun their side
business and focus completely on CSC which will further boost the growth of
CSCs. On an average a VLEs net operating income from the CSC is about Rs
2,570 p.m . This net operating income was found to be around 50% of the gross
income generated from the CSC i.e. almost 50% of the gross income from the
CSC goes into operating and maintenance expenses. On the lower side the net
operating income per CSC was found to be below Rs 3000 while on the higher
side above Rs 10,000 - the corresponding operating and maintenance expense
ranged between Rs 2400 to Rs 4000 p.m,

3. CSC profile
Almost half (46%) of the CSCs are open all 7 days a week - this gives more
flexibility to the rural citizens. The average number of villages covered by a CSC
is almost 5. 85% of the villages are electrified; however supply of electricity is not
regular and 15% of the CSCs do not have any power backup. Due to electricity
issue, few SCAs have made it mandatory or prefer to have laptops in the CSCs
as they are more power efficient and have an in-built power backup. The average
floor area was found to be 146 sq ft which is quite close to the benchmark of 150200 sq ft. The average number of Desktop/ Laptop (1.2) and printer (1.1) just
exceeds the benchmark (1) but the penetration of other hardware such as
webcam and photocopy machine was found to be relatively on a lower side.
Overall, the use of brand new infrastructure (both physical and IT) is high (91%)
since a majority of the SCAs only allow the deployment of 1st hand equipment in
the CSCs which further has an impact on the quality and efficiency of the
services provided. Another crucial parameter is internet connection which not
only aids in bringing down the digital divide but can also help in increasing
footfalls with more B2C and G2C services being accessible. Already, two out of
every three CSCs is found to be having internet connection. Moreover, majority
of the connections (54%) are low speed this limits the kind and quality of
services that can be offered. The high incidence of low speed connection can be
attributed to extensive use of VSAT (39%) and other wireless options (29%) like
data card, etc. which is narrowband. According to some SCAs, the VLE is unable
to bear the cost of Internet connectivity especially when he is not making enough
money in the absence of G2C services. Moreover the share of the VLE in the
revenue from the Online Services is anywhere in the range of 75-90% while for
offline service it is 100%. Many SCAs are waiting for BSNL to lay its network
rather than opting for any other connectivity. The major argument being that
BSNL is the most economical option and it also provides satisfactory solutions in
terms of speed/reliability. After the recent Govt. decision to connect all Gram

Panchayats by optical fiber in the next 3 years, connectivity problems hopefully

should be resolved.

4. Awareness and Usage amongst Citizens

Based on 1,11,733 responses, almost one in every five citizens is aware of the
CSC Scheme The awareness amongst Village Heads stood considerably higher
at 46% given their involvement in selection of CSC location. The primary source
of awareness for citizens was found to be the Village head (23%) followed by
VLE (16%). However only 4% of the citizens have ever availed a CSC service.
Amongst those who have - majority have used services related to IT/Telecom like mobile recharge, DTP, Internet surfing etc followed by Commercial services
like bio-data preparation, matrimonial services etc (35%).

Lack of awareness (45%) and non existence of a need to use the services
available at the CSCs (44%) are the two major reasons for CSCs not being used
by citizens. Thus, an aggressive effort to create awareness by different entities is
expected to increase usage significantly. Some of the SCAs are currently in the
process of identifying more relevant services to be offered. Government agencies
have cited frequent power cuts as a common reason impacting the CSC usage.
As per the village head central location of the CSC (59%) and reasonable service
charges (58%) are driving forces for the usage of the CSCs. CSCs have
emerged as a preferred option as more than half the citizens prefer the CSC
mode vis-a-vis the traditional mode. As per the VLEs, G2C services (90%)
followed by Agriculture related services (66%) are currently demanded by the
citizens but not available. The citizens are likely to use services such as
information about crops and agricultural policies in the future.

5. Awareness and Usage amongst Local Level Intervening

Institutions (LLIIs)
LLIIs are the organizations at local level like Schools,YouthClubs, Anganwadi,
NGO/CSO, SHGs etc. providing their services through CSCs. Of the 3,300 odd
LLIIs interviewed by us, 40% are aware of the CSC Scheme. Amongst those who
are aware, 42% have ever used a CSC and 58% of the users are from the
education sector. 53% of the LLIIs have used services related to DTP work such
as printing, photocopying etc making it the most popular service. Internet
access emerges as the next most used service with 27% of the LLIIs using it
which further builds up the case for internet connectivity. Also, about 30% of the
LLIIs use CSCs at least once a week. The key reasons for using CSC by LLII are
ease of access (78%) followed by convenience (72%) while limited number of
services (56%) and irrelevance of services available (44%) are the main
deterrents.

Most SCAs are not actively engaging with local level intervening institutions and
are focusing more on the National Level Service Provider (NLSPs) with whom
they have a revenue sharing partnership. Some NLSPs are operating on the
prepaid model wherein the SCA is required to deposit the money in advance to
the NLSP. While the advantage to NLSP is reduction in risk, the SCAs are not
comfortable with this model and advocate doing away with it. Lack of G2C
services is one of the key challenges felt by NLSPs as well as they feel the entire
CSC model was based on that and VLEs viability and credibility depended on it.

6. Impact on Government Agencies (GAs)

In-depth interviews were conducted with 49 Local level Government Agencies
such as BDOs, Collectors etc and 9 State Development Agencies (SDA).
Amongst the Government Agencies 27% were unaware of the CSC scheme.
More than 20% officials did not know or remember the name of the SCA
suggesting a gap between the operations of the SCA and the district authority

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while approximately half of them felt the SCA was not working in close
coordination with the district authority. Different reasons have been cited by the
GAs for lack of G2C services. These are weak SWAN linkages, lack of
computers and back office processes, inadequate number of skilled employees,
insufficient infrastructure hardware, etc.

In none of the districts covered were the CSCs are being used for internal
purposes like data collection, evaluation of new schemes, etc. However, most
officials considered this as a useful idea to be implemented in the later stages.

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