eChoupals

1
eChoupals

• A Study on the Financial Sustainability of
  Village Internet Centers in Rural Madhya Pradesh

2
ICTs and Sustainability

• Author focuses on financial sustainability b/c
  without financial sustainability project will not
  survive
• Large funding agencies typically fund the
  incubation period
• Indias largest commercial ICT project ITC - IBD
  eChoupal
• Ability to recover investment of ICT
  infrastructure through a more efficient
  agricultural supply chain

3
Before eChoupal (Mandi)

• Farmers in trolleys -gt Mandi -gt auction to Agents
• Necessity of Mandi / Commision Agents
• Lack of physical infrastructure (distances, small
  sized farmers)
• Responsibility / risk of dealing with large
  number of farmers
• Costs to farmer
• Transportation Cost
• Cost of weighing produce
• Labor charges moving product from Mandi to
  warehouse
• Price fluctuations based on quality of product -gt
  traders mix product sell for profit
• Paid in installments (few days to few months)

4
eChoupal

• Set up agri supply chain that reaches farmers
  (like Mandi)
• Set up to increase soybean quality, decrease
  procurement cost
• Soybean Procurement
• Farmers come directly to one of 9 warehouses
• Spends less per ton of produce
• No commission / transaction costs to middlemen
• Crop tested for quality
• Crop weighed on automatic scale (people dont
  calibrate the instruments)

5
eChoupal Operational Model

• Find an entrepreneur
• Farmer w/ medium sized operation in a village to
  become agent of change
• To receive .05 of every rupee sold through
  Choupal (incentive)
• ITC pays start-up costs
• Computer printer / solar panels / UPS with
  battery / optional VSAT (internet)
• No rent b/c using sanchalaks
• Entrepreneur pays electricity / telephone /
  travel to office

6
eChaupal vs Mundi

• eChaupal Advantages to Farmers
• Provides futures price information to farmers
• They can know when to come to sell crops
• Bypass middlemen by selling directly to ITC
• Reimbursement to farmers for transport costs
• No payment to for bagging / weighing
• Pay farmers full payment at time of transaction
• Farmers save Rs 270 / ton
• Only reaches middle-sized farms

7
Reduction of Transaction Costs
8
eChoupal Sustainability over 16 months

• Primarily used for soybean procurement
• Choupals 461 in Year 1 -gt 796 Year 2
• 133 K tons of soybean product purchased through
  eChoupals
• Saved Rs 25.8 million in transaction costs (2 of
  produce)
• Rs 194 Rs / Ton savings
• 15.9 Million savings through improved quality (No
  Mixing)
• Total Savings Rs 41.7 Million
• Total Investment Rs 75.7 Million

9
eChoupal Financial Analysis

• Extrapolation of 16 months of financial data to 7
  years
• Variables
• 20 to 50 failure rate of crop from lack of
  rainfall
• 6 to 15 - Lost opportunity cost (vs.
  investment in bonds, etc.)
• 15 to 20 cash depreciation
• Would recover its costs within 3.9 to 5.8 years

10
Payback Period
Not only sustainable, but eventually profitable
11
Future Stories?

• Mobile Phones vs. Computers?
• Information exchange between the farmer the
  eChoupal?
• eChoupal used as distribution of other products /
  services?
• Reach into poorer and more remote parts of India?
• Dissemination of agricultural best practices?