Executive Summary

for

Mid Term Assessment Study of

CSC Scheme:

April 2010

Prepared For:

Prepared By:

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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

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infrastructure required for the project. Further, some of the potential citizen-

centric 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

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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

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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

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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

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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,

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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 150-

200 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

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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.

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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.