ITC E- Choupal

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ITC E- Choupal

• Xavier Institute of Management, Bhubaneswar

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Case Background

• Rural markets are complex and challenging
• Business practices are under- developed
• Infrastructure constraints are many
• Market access for the producer is an issue

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ITC Innovation

• E- choupals ( information centers) connected to
  the internet
• Linking farmers to firms and markets
• Supply chain integration

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Indian Agriculture A Paradox

• Economically vital but archaically regulated
• High levels of production with low productivity
• High levels of information asymmetry

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ITC Intervention in Soya Bean

• Oil seed complex
• Groundnut Mustard( traditional)
• Sunflower Soya( non- traditional)
• Shortage in the 1970s and 80s

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Continued

• Policy measures to increase production
• Soya Sunflower boosted production
• ITC Intervention in Soya beans

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Traditional Soybean Marketing

• 90 of the produce marketed through traders
  government regulated markets
• Mandis, traders producer co-operative societies
  
• Modalities Norms

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Mandi

• Central to agricultural marketing
• APMC act
• Soyabean mandi services around 700 sq kilometers

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Commission Agents

• Kuccha and Pucca Adatiyas
• The Agrawaal Jain community
• Formidable presence and stranglehold over the
  business ( Norms)

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Mandi Operations( Modalities)

• Inbound logistics
• Display and inspection
• Auction
• Bagging and weighing
• Payment
• Outbound logistics

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Inefficiencies ( Process Improvements)
Inbound logistics Cost to farmers Information asymmetry
Display and inspection Crop exposed to the elements Inspection unscientific arbitrary No incentive for quality
Auction Loss of dignity
Bagging Weighing Farmer bears the cost Wastage by Tulawatis
Payment Irregular payments
Outbound Delays
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Other Inefficiencies

• Limited storage
• Unreliable information services and platforms
• Potential of forward contracts unrealized

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ITC Analysis of Soya Trade

• Price and quality distortions
• Distance from farmer
• Daily price inflation
• Intra day price changes

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Creation of ITC e- Choupal

• Virtual vertical integration
• A social imperative

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e- Choupal Strategy

• Reengineering Vs Reconstructing
• Addressing the whole
• An IT driven solution

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IT Driven Solution

• Delivery of real time information
• Facilitating collaboration
• Crop specific intervention
• Low cost last mile
• Intelligent first mile

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E- Choupal Operation

• Sanchalak Samyojak
• 1000 farmers per Choupal
• Trust the foundation of the business
• Grass-root level leadership

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Trust Sanchalak Selection

• Living from farming
• Median wealth
• Progressive
• Ambitious
• Literate

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Transaction in ITC Platform

• Pricing
• Inbound logistics
• Inspection gradation
• Weighing Payment
• Hub logistics

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Transaction Efficiencies
Pricing Static average quality price In situ quality control and price offer VSAT connectivity
Inbound 30-40 Kms from farmers Warehouses or ITC factories
Inspection grading Methods the farmer can understand No lab tests
Weighing and Payment Electronic Full payment and reimbursement of freight
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Gains to Farmer

• Better information content
• Better timing of information
• Reduced transportation cost
• Shortened transaction time
• Increased weighing accuracy

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Gains for ITC

• Risk management
• Reduction in freight cost
• Control on quality
• Procurement savings

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Harnessing the Power of the Network

• Procurement
• Rural Distribution- 100 partnering companies
• Financial Services
• Rural retail

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Concluding Thoughts- Vallabh Sridhar

• Manpower driven TO Technology driven
• Disintegrated TO Integrated supply chain
• From Finance TO information as a source of
  control

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Negative Effects

• Loss of business for bazaars adjacent to Mandis
• Loss of revenues to Mandi
• Crushing units loose business

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Kiosk Business Planning

• Number of Services
• Total revenues
• Break up of revenues
• Number of customers
• Categorisation of customers
• Average revenues per customer

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Types of Services
Customised services Free services
Offline services Recurring services
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Value and Demand of Services
Low Demand and High Value High Demand and Value
Low Demand and Value High Demand and Low Value
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Customer Profiling
Regular low value customer High Value regular customer
Low/ no value irregular customer High Value irregular customer
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Infrastructure/ Cost Considerations
Low cost reliable infrastructure High cost reliable infrastructure
Unreliable low cost infrastructure High cost unreliable infrastructure
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Technology and Applications
Cost of technology Competing Technologies
Scalability robustness Level of customization Number of applications Adaptability Efficiency of servicing (promptness) Cost of Servicing
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Partner Organisations
Risk sharers Infrastructure Sharers
Revenue sharers Promoters
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Overall Considerations
Communication channels Documentation methods Learning curve
Time table of withdrawal of subsidies/grants Objectively verifiable parameters Indicators and early warning systems
Projections Cost Revenue
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Close of Sessions

• Thank You