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School of Good Governance And Policy Analysis

National Workshop onDisseminating Information on Good Practices

in Public Service Delivery June 5, 2009

ITC's e-Choupal Movement: Transforming Lives and Landscapes

-Shri Rajnikant Rai, Executive Vice President,

ITC-Agri Business Division, Secunderabad

Scope of My Presentation

What is Governance? What constrains Good Governance in

rural India?

What is ITC eChoupal?How does / can ITC eChoupal play a

role in Good Governance in rural India?

What is Governance?(the people perspective – a subset relevant to this presentation)

Expanding people’s freedom of choice and action Enhancing people’s capabilities to shape their own lives

Economic EmpowermentConnecting People to Markets ,

Policy for favourable Investment Climate ,Quality Infrastructure

Social EmpowermentIssues of Exclusion ,

Access to Assets & Basic- Services (Health / Education) ,

Accountability

Political EmpowermentAccess to Government

Regulation with minimum controls

What Constrains Good Governancein Rural India (e.g. Farmers)?

Fragmentation, Dispersion, Heterogeneity Most of them are small (1.5 ha average holding)

o They do not have bargaining powerAll of them live in hinterlands (600,000 villages)

o They do not have access to real time informationThe circumstance of each one is very different

(agro-ecological conditions, resources)o They cannot get customized knowledge advise

And, all this is further compounded by weak infrastructureo Physical, Social, Institutional

The ITC eChoupal Proposition

Step 1: Leveraging Information Technology for empowered access to markets (inputs & outputs)

Step 2: Economic viability of IT infrastructure investments through Win-Win business model, hence scaleable

Step 3: Customer responsive IT infrastructure in the villages facilitate access to supplementary Education, Health, eGovernance services

VILLAGE

TOWN

Farmer

Mandi

Price Discovery@ Sell Transaction

Video

PRODUCT&

SERVICEPROVIDERS

MoneyLender

Financing

MarketTransaction

ExtensionCenter

Knowledge (Use)

Traditional TransactionsSell:

Buy:

Middleman

sunk costs, inconvenience,other losses

high prices, spurious goods, information not timely

Information(Aggr)

TOWN

Mandi

Samyojak

Choupal Saagar

VILLAGE

Farmer

Sanchalak

Transactions

Transactions through ITC eChoupalSell:

Buy:

Information(e.g., Price Discovery)

Video

Knowledge (Customized)

PAN-INDIAN

PRODUCT&

SERVICEPROVIDERS

Price discovery @ village, choice, efficiency

Information + Customized Knowledge @ village, high quality,competitive prices, superior service

Transaction Costs in Mandi ChainSoybeans Example

Farmer Incurs

Trolley Freight to Mandi = 120Labour = 50Kacchha Adat = 150Handling Loss = 50

Rs per MT

370

ProcessorIncurs

Commission to Agent = 100Cost of Gunny Bags (net) = 75Freight to Factory = 120Handling at Mandi = 40

335

Total Chain 705

Transaction Costs in Choupal ChainSoybeans Example

Farmer Incurs

Trolley Freight to ITC Hub = 120Labour = 50Kacchha Adat = 150Handling Loss = 50

Rs per MT

370

ProcessorIncurs

Commission to Sanchalak = 100Cost of Gunny Bags (net) = 75Freight to Factory = 120Storage & Handling at Hub = 40

335

Total Chain 705

120

50

Cash Disbursement Costs = 50

215

335

The eChoupal Infrastructure

ICT Kiosk with Internet Access In the house of one trained farmer, Sanchalak Within walking distance of target farmers

Warehousing HubManaged by the erstwhile middleman, SamyojakWithin tractorable distance of target farmers

The Privileged Assets of eChoupal

1. ICT Infrastructure:a. Computerb. Internetc. VSATd. Power Backup : Solar Cells and UPS

2. Physical Reach:a. Choupals within walking distanceb. Multipurpose WH hubs within tractor able distance

3. Key Intermediaries:a. Sanchalak (1 per cluster of 5-6 villages) 2000/stateb. Sanyojak (1 per group of 30-40 choupals)

Key Success FactorSelf Sufficient Infrastructure

Power Connectivity

Training

The structure

HUB

eChoupal(40/hub)

Catchment village

(5/choupal)

Tier 2

Tier 1

Tractable distance

HUB – Planned to graduate to a Rural SuperstoreHUB – Planned to graduate to a Rural Superstore

24 Hubs upgraded to Malls

The eChoupal Services

Relevant & Real-time Information Commodity prices, Local Weather, News

Customised Knowledge Farm Management, Risk Management

Supply Chain for Farm Inputs & Screened for Quality, Demand Aggregation for Competitive

Prices & Efficient Logistics

Direct Marketing Channel Lower Transaction Costs, Better Value through Traceability Products access @ door step @ reasonable prices

Bottomline for the Farmer

Higher Incomes through Increased Yields Improved QualityReduced Transaction Costs

Power of Scale to the Small Farmer Customised Knowledge despite Heterogeneity Real-time Information despite Distances

CSR Initiatives through e Choupal : Sunerha Kal

Sunerha Kal (CSR) Initiatives focus on Improve Farmer LivelihoodsLong Term Community Impact programmesLivestock Management programmesWater Management Self Help Groups focusing on women

Leveraging capability of ITC ‘s management skills, “e-choupal “reach , human and physical InfrastructureThe knowledge & experience of NGO’s

Causeway cum Stop Dam , Nalkui

Livestock Management

Earthern Dam – Morewani ,MP

Women SHGs -Chikankari

What’s in it for ITC?

Better supply chain for ITC’s Food & Agri BusinessesCosts, Quality, Traceability

Access to the Underserved Rural MarketsThrough a Virtuous Cycle created by “Larger

Incomes”, and founded on “Trust” that is built

New Business OpportunitiesHealth, Education, Entertainment, eGovernance

Wheat

Soybean

Soybean& Wheat

Coffee

Aqua

Wheat

Soybean

Soybean& Wheat

Coffee

Aqua

Scale Today

Kiosks: 6,200

Villages: 31,000

Farmers: 3.5 million

Thank You

ITC Limited