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ICFAI NATIONAL COLLEGE

AHMEDNAGAR
A LIVE PROJECT REPORT

“To study The ITC’s e-Choupal: Taking e-Business to Farmer”

Submitted to

ICFAI UNIVERSITY

IN THE PARTIAL FULFILLMENT OF THE

Master of Business Administration


SUBMITTED BY

Pokharna Ronak

Enrollment No-7NBAD136

CONTACT NO. 09850697895

UNDER THE GUIDENCE OF

PROF. JAYPAL DHOBLE.


CERTIFICATE

This is to certify that below signed has completed a project study


on ‘ITC’s e-Choupal, Taking e-Business to Farmers’ successfully
under my guidance and supervision. This work is original in
conception and collected data will be used only for academic purpose.

Place: Ahmednagar Mr. Jaypal Dhobale


Date: 12/02/08 (ESM Faculty Guide)
INDEX

Sr. No. TOPICS


1) Objective of case study and project
2) Introduction
3) Background note of company
4) Facts and observation
5) Problem resolution and challenges
6) Expansion spree
7) Key learning

OBJECTIVE
1. Understanding e-Choupal concept which, implement in practical
market by ITC Ltd.

2. To know e-business concept & in this processing and all


activities.

3. Understand all activities as well as challenges, problems and


solution & various roll which act in this business.

4. To know profile of ITC Ltd. and their business, product, award,


reward, business strategy, etc.

5. Improve our own general knowledge about this company & this
business concept.

6. To learn business skill this can help in future.

7. For submit & present to faculty teacher.

INTRODUCTION
Today in 21 century e-business & e-commerce initiative
have become popular but it may be rather difficult to think of
poor illiterate farmer in a centre position dusty villages of India
making e-business a part of their daily lives.
In Indian village may not have basic facilities such as
electricity, telephone, & transportation facilities? And in India
have 75% proportion of farmer & in that huge are illiterate & not
aware of existence of computer, let alone the internet & e-
business. However large number of illiterate farmers group
conduct e-commerce transaction easily in the year of 2002 with
the help of innovative & revolutioning concept of e-Choupal
which introducing by ITC Ltd.
The purpose of e-Choupal implementing is net working the
village via internet & procuring agriculture product from farmer
for export. ITC started with just six e-Choupals in June 2000. ITC
had managed to establish 1200 e-Choupal centers in
approximately 6500 village across 14 states within next five to
seven year.
ITC’s success rather than Tata chemical, Mahindra &
Mahindra, Rallis & EID had failed badly due to ITC’s long term
vision for e-Choupal is grand & company started with modest &
focused value proportion that is farmer get’s better price for
crops, that why ITC’s gain creditability through early success &
learn from its mistakes.
BACKGROUND OF ITC’s
• ITC was incorporated in August 1910 as the Imperial
Tobacco Company of India Ltd. by base company BAT.
• Next sixty year’s only concentrated on growing &
consolidating cigarate business soon emerged as a leader
in cigarate industry.
• Company diversifies into other business & enters in to
marine product in 1971.
• In 1974, the company’s name was change to I.T.C.Ltd.
• The company entered the hotel business in 1975.
• In textile business with Tribeni Handlooms in 1977 & paper
business with Bhadrachalam Paperboards in 1979.
• In 1981 diversify into the cement business buying a 33%
stake in India cements from IDBI.
• In 1980’s I.T.C. set up an information systems division
named it I.T.C. Infotech India ltd.
• In 1986 entered the financial service business setting up a
subsidiary I.T.C. Classic Finance, consolidated with the
ICICI in 1987.
• In 1990 the company set up an International Business
Division (IBD) for exporting agricultural commodities.
• In 1994 I.T.C. approached consultants McKinsey and co. to
detailed study of company business. As per advice
concentrate on core business & withdrawn from non-
profitable business.
• In 2000 entered in greeting card, gift, stationary &
accessories, retail store chains to sell clothes and
accessories, foods and commodities, & branded match
boxes.
• In 2001 company’s name was changed to ITC Ltd.
Award –
The ‘Far Easter Economics Review’ survey of Indian
companies ranked ITC as the eight among the top ten corporate
in the country (2000).
About IBD-
IBD exporting agricultural product worth Rs.7.5 billion &
thus, becoming India’s second largest business. IDB’s main
export were rice, soyabean, aqua product, peanuts, wheat,
coffee, black paper, sesame seeds & processed and frozen fruit
and vegetable. IBD was chosen as a leading supply chain
partner by organizations.
But company did not get desire profits due to several
reasons –
• Did not have sufficient control over the supply chain of the
agriculture produce.
• Did not have direct control over the quality of product.
• Lack of infrastructure for storage, handling &
transportation of the produce acted as major hurdle.
• Middlemen & intermediaries.
FACTS AND OBEZERVATION
DETAILING THE E-CHOUPAL INITIATIVE
Traditionally, a farmer sold his agriculture produce to a
small trader referred to as a ‘Kaccha adat.’ The small trader
called the ‘Pakka adat.’ Who sold the produce in a ‘mandi’
(market place). Here, brokers interacted with this large traders
& helped theme sell their produce to corporate. This whole
procedure involved many intermediaries who resulted in
procurement cost being as high as Rs. - 700/- per tone of Soya.
Typical, farmer did not have enough resources to take his
produce to mandi. He had depend on like – weather report given
by intermediaries. Consequently, the farmer did not get a fair
share of money.
Initially, ITC’s main objective was to reduce number
of intermediaries in the whole process. Primary task for ITC
was to bring this information to the farmer’s. The company
decides to utilize IT tools to network the villages & leverage the
internet to provide information to the farmer & other people
involved. The basic idea was to equip village choupals with
personal computer (PC). And provide them internet connectivity.
In June 2000, the project was launched in villages of
Madhya Pradesh. Launch for Soya farmer website
www.soyachoupal.com. ITC invest sum of 0.1 million to 0.3
million for each Choupal.
First, ITC opened three soya processing and collection
center in that created a role of ‘sanchalak’, an individual who
would supervise and coordinate the activities in e-Choupal.
Company began looking out for farmer from the villages around
this collection center to head each Choupal. The sanchalak had
to be chosen very carefully because if he was big farmer, he
would show little interest in making the Choupal work & if the
farmer was small, the rest of farmers would not accept him as
their leader. Therefore, a sanchalak had to be a person of
reasonable status in community. After selection a sanchalak a
PC was then install in his house & he was given training on using
it. This method worked out cheaper for company as it did not
have to invest in establishing internet kiosks at different places.
The sanchalak helped the farmer by guiding them in
checking the prevailing prices & other related information on the
PC. The sanchalaks were paid 0.5% of the procurement price for
each ton soya product by ITC for their Choupal. Before
implementing any new initiatives, ITC consult its sanchalaks.
Besides, regular ‘Choupal’ meets were held. This not only
provided the company feedback from farmer, but also
generated new ideas.
ITC also began to gather all information required by the
farmer like the daily mandi prices, weather reports, global
prices, best farming practices and other services like water, soil
and PCR testing made available each choupals. Current
information like mandi prices, weather reports and global prices
were down loaded via the internet. Static information like best
forming practices was made available on compact discs (CD’s)
or was installed in the PC’s hard disk while setting up the
choupals.
Next important step for the company was to deal with the
commission agent at the mandies. These commission agents
had a strong influence on the prices and where therefore
consider being very powerful. But, implementation of e-Choupal
totally disrupted there business and most of these commission
agent were upset. ITC knew that for smooth functioning of its
project, it could not afford to totally ignore these agents.
Therefore the company devised a new roll for them and called
them as ‘samyojkas’. Like – sanchalak, samyojkas. Also
underwent training and took an oath before being appointed to
office.
The samyojak were also responsible for collecting the
produce from village that were located far away from the
processing center and bringing it to these centers. The
samyojak was paid 1 percent commission for his service. ITC’s
reduce cost by 500 tones on procurement.

PROBLEMS AND CHALLENGES


Implementing & expanding the e-Choupal initiative was
not an easy for ITC. The company faced several problems like –
intermediary unrest, widespread illiteracy, outdated telephone
exchanges and sporadic electricity supply.
• Out dated telephone facility – Where the connectivity was
poor due to the lack of proper telephone lines, ITC
upgraded the telephone lines using RNS kits (RAX network
synchronization) and in some cases, by using VSATs to by-
pass the telephone lines completely.
• Sporadic electricity – ITC made use of backup batteries,
which could be recharge with solar panels.
• Government regulation – Produce Marketing Comities Act
(APMC Act) prohibited a company from purchasing certain
specified commodities from any source other than
government design mandies. Theses item included
soyabean, coffee and wheat, all products ITC dealt with. ITC
persuade the state governments by telling political leader
& bureaucratize leaders about the benefits of the project to
farmers and other was involving it.
• Illiterate farmer – ITC was able to train the first group of
sanchalaks in just two hours rather than the two days it
had initially planned for. By-showing video, farmer using
the computer.

EXPANSION SPREE
After succeeded in the experiment with soyabean, ITC
began to look for new avenues to look for new avenues to
expand its business. Soyabean was just a small part of its entire
agribusiness portfolio. Value chains differed from one crop to
another depending primarily on two factors; firstly on the
dynamics of the commodity the farmers traded in and secondly,
the socio-economic strata they belonged to.
In December 2000, the company launched a website,
‘Planters net’ (www.plantersnet.com), to deal with the coffee
farmer in Karnataka. ITC set up 75 kiosks to cover 6000 coffee
farmer in 125 villages.
In November 2001, ITC started its e-Choupal program
(www.echoupal.com.) in Utter Pradesh (UP). The company was
attracted by the size of the wheat market; in UP, the annual
wheat production was 120 million tones- almost 14 times more
than soyabean production in MP. Approximately 180 kiosks were
set up reaching more than 375000 wheat farmers in over 1500
villages. The execution of program was similar to that for
soybeans in MP.
Ones e-Choupal initiatives generating good results, led to
the decision using the kiosks for ‘reveres trading,’ that allowing
other companies to sell their products directly to farmer via
internet. In early 2002, ITC brought in companies like Monsanto
(a US giant dealing in seeds), BASF India Ltd. (an Indian
agrochemicals major), Nagarjuna fertilizers, (Indian fertilizer
manufacturer) and Madhya Pradesh State Seeds Corporation
(MPSSC).

KEY LEARNING

Maintenance of local partners, the company’s commitment to


transparency, and the The e-Choupal model demonstrates that a large corporation
can play a major role in recognizing markets and increasing the efficiency of an
agricultural system, while doing so in ways that benefit farmers and rural
communities as well as shareholders.
The case also shows the key role of information technology, in this
case provided and maintained by a corporation, but used by local farmers, in
helping bring about transparency, increased access to information, and rural
transformation.
Critical factors in the apparent success of the venture are ITC’s
extensive knowledge of agriculture, the effort ITC has made to retain many
aspects of the existing production system, including respect and fairness with
which both farmers and local partners are treated.

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