Give them empowerment first

The Hindu Business Line, 19 Nov 2004 Rasheeda Bhagat The e-choupal initiative rests on the principle that what farmers need first is empowered access to markets. If that is available, the awareness of rights will follow, says S. Sivakumar, Chief Executive Agri Business, ITC.

S. Sivakumar, Chief Executive Agri Business, ITC. The ITC's e-choupal initiative has already reached 30 lakh of India's farmers and by 2010, it hopes to reach 10 million farmers. On the insight this initiative has given him on India's farmers, S. Sivakumar, Chief Executive Agri Business, ITC, who has been involved with this venture right from 2000 when it began, says it has three layers which put together can effectively serve as a universal service-delivery mechanism for rural India. The first is the e-choupal where ITC sets up a computer network at a cost of Rs 2 lakh at the sanchalak's house. The second layer is the brick-and-mortar multiple services centre managed by the traditional commission agent. The third layer is a "pan-Indian network of a whole lot of collaborative institutions... more than 80 companies are now participating in an initiative orchestrated by ITC." This is the Choupal Sagar or the mall where goods ranging from motorcycles to home appliances, fertilisers to branded shirts and trousers are sold. He explains how ITC has moved away from the traditional model of development in rural areas that begins with setting up social infrastructure like self-help groups, co-operatives, etc. Then comes the second layer of political awareness and rights, followed by providing the linkage to the markets. "We believe that what makes more sense, and is probably more sustainable and scalable, is to reverse this equation and provide an empowered access to

markets as a first step. When there is empowered access, the awareness of rights will follow." He feels this is a more sustainable model because traditionally most of the self-help groups whether of farmers or women even though they realised collective strength in terms of rights and social awareness, were not able to scale up or sustain higher income levels, because the market linkages were not good. But in the choupal model, the farmer is given both information and linkage to the market at the same time. Of course, ITC benefits on several counts. "If the farmer comes and delivers directly to my warehouse, I save certain costs. Instead of getting what I need from the mandis, I buy directly from the farmer. My cost comes down and the farmer gets a higher price through elimination of wasteful intermediation." Giving an example, he says that if under two years ITC's Aashirwad aata has become the No. 1 brand in the country with nearly 15 per cent of the market share in aata, it is primarily because of quality, "which was a result of the choupal infrastructure. Because we now buy from the farmer directly and we are able to store different varieties of wheat separately. When farmers sell in mandis or the FCI, all the wheat gets aggregated. And after that it can't be segregated. So sometimes the atta quality is very good, sometimes it is quite bad, and the consumer has to deal with it. But today when we store wheat separately, we have different blends. "What is sold in Kolkata, Mumbai or Chennai is very different as consumer preference is different in terms of level of coarseness, colour, usage for pooris, chappatis or parathas, the water absorption capacity, and so on. Earlier consumer preferences were not matched with the wheat grown, and the farmer didn't get the right value for his produce. But that is changing now." Coming to the mall where a host of FMCG products and other consumer durables, insurance, etc are being sold to rural people, he says that the mall stocks products of about 80 companies who pay a fee to ITC for using this channel. "The reason why it has to be a multicompany marketing channel is because the purchasing power is quite low in rural areas. But if you can reach the products at lower cost, volumes will come. With 80 companies making use of this channel, the cost of distribution comes down and lower prices can be offered." So you have Marico, Philips, TVS, Hero cycles, Usha, LG, Sonata, etc being sold through a single mall in Sehore. At this point, the money ITC makes by allowing other corporates to use this channel hasn't exceeded Rs 1 crore yet, but that will grow substantially over a period of time. Here the 7,000-sq-ft mall is housed in an eight-acre complex, which includes the ITC procurement centre, complete with an electronic weighing platform where the farmer's grain is first weighed along with the vehicle. This eliminates wastage through handling of individual bags. By end-2005, Madhya Pradesh will have 25 such malls, and another 25 will be put up in Rajasthan, Uttar Pradesh and Maharashtra. On the crucial question regarding the increase in farmer's income due to this initiative, Sivakumar says that there is both a direct and indirect benefit due to empowerment; farmers

are able to demand better services, and sell at better rates because of transparency, and there is no cheating on weight. "People typically respond saying `our incomes have gone up between 20 and 40 per cent because of this initiative', directly or indirectly. But to get an accurate picture, some more time is needed." He agrees that the ultimate objective of any venture is to raise incomes; "it's not enough to be aware of rights and feel good about it. In India, at least 50 years of development effort has gone into the model of social awareness first, followed by infrastructure and economic development. While things have improved, it is not in consonance with the kind of resources put in. "We still have a whole lot of poor people, gender and social inequity. And obviously there are other agencies perusing that sequence. But as a commercial enterprise, we are attempting to enmesh the two business activity with general development. The well accepted and articulated definition of development is one of freedom of choice; you should have more choices and be able to act on those choices. Also, you should be able to build and enhance your capabilities to live your life the way you want. If these are accepted, then we believe it can be done in a more sustainable and scalable fashion through this model. If in four years we're able to touch the lives of 30 lakh farmers and going strong, it is because we have provided them access to markets in an empowered manner and out of choice. If a price is given to a farmer in a village we're not saying that just because you got my price free of cost, come and sell to me. If you get a better price elsewhere, you have the freedom to go there." Of course, earlier too he had the choice of going to the mandi, not sell and bring back the product if he was not happy with the price. But having gone to the mandi incurring a cost, very rarely would he bring back the product for fear of multiple transaction cost. Another crucial factor on which the success of the choupal initiative hinges is the increase in modal and not mean income, says Sivakumar. The threshold income of more farmers needs to go up rather than the rich farmers getting richer. "In a village, out of 100 farmers, if the top 10 farmers' income increases substantially and not that of the other 90, your consumption will not increase in the same proportion. But in an integrated model like ours, where you also rely on the consumption of goods and services, it's a two-way channel and depends on modal income increase." Another ITC initiative in different stages of piloting is Sunehra kal (Golden tomorrow). Under this initiatives, not necessarily directly linked to ITC's business, are on. "Because the platform is there and we have traditionally been spending CSR money, we are using this mechanism for improving the lives of rural people," says Sivakumar. One initiative is on cattle, which is a source of income in most rural homes. Another is on linking some livelihood activity for women to the markets or the banks. Water harvesting and water management is another area where ITC puts in money to revive the traditional water body in the village. http://www.itcportal.com/about-itc/newsroom/press-reports/PressReport.aspx? id=523&type=C&news=Give-them-empowerment-first

Grain revolutionThe Hindu Business Line, 19 Nov 2004 Rasheeda Bhagat What touches your heart at ITC's sprawling Choupal Sagar in Sehore is that along with the larger farmers, it has time... and space... for the small farmer who might have on offer just two bags of grains transported in a small cart.

Mangelal Verma, e-choupal sanchalak in Kakarkheda near Sehore, Madhya Pradesh. Kailash Pathdhar is a farmer from a village near Ujjain and has come to attend a workshop for e-choupal sanchalaks held at Bhopal by the ITC. Here sanchalaks (farmers trained to operate the computer and offer a myriad of services to fellow farmers) will rub shoulders with bureaucrats, agricultural officials and researchers, and discuss ways of improving their yield. All the farmers grow soyabean widely known as sona (gold) in this region, wheat, channa, and sugarcane. As the meeting resembling a mela is on, Pathdar's mobile phone is buzzing. Rahul, his 13year-old nephew, has good news for him. Even though Pathdhar is away, his choupal (the centre that provides free information on agri-product prices) is active, and Rahul has clinched seven deals in which farmers from his choupal will sell their soyabean produce to ITC that day, at a price of Rs 1,200 per quintal. On each trolley the sanchalak will make around Rs 200 to Rs 250 as his commission. Pathdhar says that the last time his computer went on the blink, "Rahul came with me to the ITC hub in Ujjain. By the time I finished my work, Rahul had been briefed by the engineer on how to get the computer working, and he set it right after reaching home." ITC's 5,050 e-choupals have ushered in a revolution of sorts in the six States of Madhya Pradesh, Uttar Pradesh, Maharashtra, Andhra Pradesh, Rajasthan and Karnataka, servicing the integrated needs of 30 lakh farmers. While the core activity is to tell the farmer the price at which ITC will buy soya or wheat that day, the choupals have quickly expanded their

activities to help the farmer with soil testing, combating pests, weather forecasts and improving yield through research inputs. Whether it is spreading awareness on consuming iodised salt something that helps ITC's Aashirwad brand of salt or getting life insurance (LIC and ICICI Prudential) the choupal plays a role. Waiting for best price Some of the smarter sanchalaks keep a sharp eye on the trend in future prices by looking at the price of deoiled soya cake at the Chicago Board of Trade and advise the farmers whether to sell that day or hang on for a better rate. The housewife too has an assured supply of LPG as ITC's choupals have tied up with BPCL for LPG supply. The sanchalak aggregates the demand and once in 15 days LPG cylinders are supplied. If ITC's choupals are giving the traditional mandis (quasi-government agricultural marketing centres) a run for their money and taking away farmers' patronage, it is not without reason. As Pradeep Bhargav, a sanchalak from Ujjain points out, not only does the choupal give the farmer the price information and the freedom to decide whether he'll sell his produce that day or wait for a better price, the weighment at ITC's procurement centres is accurate and there is no wastage. "In the mandi, when the farmer took his produce, the trader would typically pick out a handful of grain, look at it and fling it, saying scornfully: What kind of grain have you brought.. yeh tau bekar hai (This is useless). What this does to the self-respect of a farmer, who has toiled for months to harvest his crop, can be best understood by another farmer. More than being shortchanged in the price or weight, such arrogant behaviour shatters him." S. Sivakumar, Chief Executive, Agri Business, ITC, says that what started as an agriculture supply chain initiative for ITC in 2000, has evolved into something which can not only empower the farmer through information and freedom to sell as and when he decides, but also service a whole host of needs. The `malls', known as Choupal Sagar, will eventually become a one-stop halt for the farmer... a place where he can bring his produce in a trailer/trolley, sell it, get cash on the spot, buy whatever fertiliser or pesticide he might require, pick up diesel from the BPCL outlets at the malls, load the vehicle and make the journey back home. The festival season is of course an ideal time to buy the consumer durables, provisions, clothes and so on, that the glittering mall is stacked with. But with a farmer getting an average of Rs 50,000 for a trolley loaded with soyabean, and that too in cash, there is bound to be some impulsive shopping at the mall. So how difficult was it to train the sanchalak, essentially a rural farmer, to operate the computer? "We had no hesitation about their ability; the only question was on time. In June 2000, while training the first batch of sanchalaks, we kept aside two days but they took in the whole thing in two hours and said what next? They have business acumen; if you can demonstrate value and benefit for them, they catch on very fast. If something has no value, they are not bothered; for us too it has been an educating experience to find out what they are not interested in!"

A farmer in Sehore near Bhopal. Farmer after farmer in the villages we visited around Sehore, about 38 km from Bhopal, said he had stopped going to the traditional mandi to sell his produce, and was happy selling his ware to the ITC, where he not only got the right weight and price for his produce, but also cash on the spot and agricultural inputs like fertiliser or pesticide at a discounted rate. But it would be incorrect to presume that everything is hunky-dory and the Indian farmer is having it good as never before. Hard-nosed business venture After all, ITC's initiative is a hard-nosed business venture that has eliminated the middlemen as far as procurement of raw material for its branded products and exports is concerned. So unless the farmer is able to provide quality product in ample quantity, the choupal venture will not be a success. Unless the farmer has a bumper crop, the white goods in the glittering mall will not move. Take soya cultivation in MP; it is largely rain fed and requires well-distributed rainfall for the dana (grain) to be like sona. While there was a bumper soya crop in India last year at 6.8 million tonnes, the highest ever, this time thanks to erratic rainfall, the tonnage came down to 6.1 million. Even though the second largest ever in India, the yield per acre came down from 4-5 quintals last year to around 2.5-3 quintals. Considering that the average landholding of an MP farmer is between one and two acres, this would mean an income of around Rs 7,200 for six quintals. But, as Mangelal Verma, the sanchalak of Kakarkheda, about 48 km from Bhopal the last few km of which is accessed through a back-breaking ride on an apology of a road points out, the cost of agricultural inputs continues to go up. "We were promised six hours of power supply by the BJP government in MP, but we hardly get two hours of electricity, we have to depend wholly on diesel. The hike in diesel prices will kill the farmers." He has 40 acres of land and at a stretch needs to get diesel worth Rs 3,000.

Ghisilal Verma, a farmer from the same village with a landholding of 30 acres, says he got only 1.5 to 2 quintals of soya per acre this year. And yet he is sitting on his entire crop, waiting for the price to reach Rs 1,500 a quintal before he will sell! Even though he might be aiming for the moon, it was heartening to find a farmer who hopes to dictate his price to the market and obviously has the financial muscle to wait for it. "I'm prepared to wait till April by which time my wheat crop will be ready. At that time I'll sell everything, whatever be the price". But on the whole this Diwali was good for soya farmers. "It was not like last time of course, but I was able to buy fertiliser, diesel and some clothes for my servants. I told my family to wait for their share of new clothes for a few more months." But Mangelal, the sanchalak, is happy with his income. "I did buy clothes worth Rs 2,000 for my family from the Choupal Sagar at Sehore. I found the clothes not only of better quality but cheaper compared to the store in Sehore where we normally buy our clothes." Obviously the sanchalaks are better off compared to the other farmers, as their new role gives them additional income. And, typically, the sanchalak has more land. He is also more educated both Mangelal and Ghulab Singh, sanchalak of Bhavkhedi, are graduates and well respected in the village. As L.V.L.N. Murty, Business Development Manager of ITC, Bhopal, puts it, "The sanchalak is the karta - dharta of the village in good times and bad. As we also sell insurance through the choupal, in times of death, he assists farmers in getting the claim and in good times helps them get the best possible price for his produce, helps out with advice on his crop, pests, etc." Suvesh Kumar Suresh, ITC's co-ordinator for social initiative, admits that this year profit margins have come down for farmers because of the rising cost of agri inputs. "Hence we've started low-cost agricultural services in the region; we give them vermin compost and other inputs mainly for organic manure production." The farmers of these villages have pinned a lot of hope on the artificial insemination centre for cattle put up by ITC in Bhavkhedi village and, after two years, when the new stock is ready, they hope their milk production will more than double. From labs to fields Emerson Nafziger, Professor of Crop Sciences at the University of Illinois, who is in Bhopal to participate in the farmers' workshop, has been coming to Madhya Pradesh for four years after the India Soya Forum first invited him in 2001. He sees "a lot of promise in this venture. Anything that brings farmers and researchers closer together should work. But one of the unknowns here is how neutral companies can be." When it is pointed out that ITC does not shy away from its interest in this venture vis--vis procurement for its business ventures, he says, "Oh yes, and lack of neutrality is a problem only if it results in less production and lower profitability of farmers and that's not in anyone's interest." When asked about the choupal initiative benefiting farmers, Dr P.S. Bhatnagar, former Director of the Soyabean Research Institute, and now an advisor to ITC, says that

traditionally in Indian agriculture there is a disconnect between the farmers and the researchers and "my dream is that farmers should be able to harness the potential of researchers. That is happening here. Our objective is to increase the profitability of farmers, but that will happen only when the yield goes up and their cost of production decreases. But the farmers are certainly benefiting; they are buying tractors and two-wheelers, and the children of many farmers are now going to private schools, a sign of progress." A factor crucial to the growth of the choupal concept ITC hopes to eventually reach at least one-tenth or 10 million of India's 110 million farmers through the choupal is the response from middlemen. In October the grain merchants of MP observed a one-day hartal against the MP government allowing "multinationals" like the ITC to buy grains directly from the farmers, bypassing the traditional mandis. That the squeezing out of the middemen or traders is a concern with the government could be seen at the Bhopal workshop, where MP Chief Minister Babulal Gaur asked the farmers if they thought the traders too should be involved in some way in such initiatives. The resounding `No' was a clear indicator of what the farmers thought. So will the middlemen make trouble? "They are of course trying to incite the farmers against the ITC and the choupal. But the Indian farmer is not a fool; he will sell his produce only where he benefits the most. Sometimes in mandis, by the time we found the price and reached it, the price would suddenly drop by Rs 20 to Rs 25. Now the farmer who has invested his time and money to hire a vehicle and take his grains to the mandi, can hardly bring it all back. So he did not have the choice that the choupal system, which is very transparent, gives him." Sivakumar says that some of the middlemen in the mandis will get absorbed in the malls as samyojak (co-ordinator) but only a small percentage. "So they will still be unhappy but they cannot sabotage something that benefits millions of farmers. Also, they have a fear of the unknown; the response of farmers to the choupal is so extraordinary that they worry if tomorrow anyone will come to the mandi at all. Of course this is an incorrect assumption because in no way can we handle 100 per cent of the Indian produce; we have only so much of the market share, so it's a lack of understanding." But as more Indian corporates come into such ventures, as is already happening, more and more traders will get absorbed into the system. "Also, thanks to competition the mandis will have to get more efficient and the traders will have to complete. With their monopoly ending the days of free lunch are over... . millions of farmers cannot be held to ransom anymore." http://www.itcportal.com/about-itc/newsroom/press-reports/PressReport.aspx? id=526&type=C&news=Grain-revolution

CHAUPAL SAGAR - Unlocking rural marketsBusinessworld, 20 Sep 2004 CHAUPAL SAGAR - Unlocking rural markets ITC flags off its first rural mall in Madhya Pradesh. What is its gameplan?

inside Chaupal Sagar: A new shopping experience for the rural folk in Rafiqganj IN Madhya Pradesh, all roads lead to potholes. Despite that, over the past month, a string of senior corporate executives from FMCG and durable companies alike have been making a car-rattling, bone-jarring 40-odd kilometres journey from Bhopal towards Sehore. Another four-odd kilometres beyond the town, just before the village of Rafiqganj, stands a freshly painted long, squat building that looks like a hangar. It is this cream, blue and green edifice that is attracting all the attention. Sometime back, ITC chairman Yogi Deveshwar promised his shareholders that the company would open 1,000 rural malls in India. This is the first one to have come up. As such, Chaupal Sagar is one of the first organised retail forays into the hinterland. It was softlaunched on 15 August. Early last week, when BW travelled to Rafiqganj, only the mall was up. But the rest of the infrastructure was expected to be ready only by the first or second week of October. Walk into the building and the first thing you notice is the high ceiling. That is because the building is actually a sprawling warehouse for storing the farm produce that ITC buys through its e-chaupals. The mall has come up in one part of this warehouse. As you walk around, you realise that Chaupal Sagar cannot be shoehorned into any of the retailing categories we are familiar with. At 7,000 square feet, it is too small to be a mall. And while it has opted for self service, stocking its merchandise on shelves lining the neat aisles, it stocks a breadth of products no supermarket can. It offers almost everything - from toothpastes to televisions, hair oils to motorcycles, mixer-grinders to water pumps, shirts to fertilisers... It defies pigeon-holing. It is just a very sharply thought-out rural store. Most of the brands it sells are national. You see Marico, LG, Philips, torches from Eveready, shirts from ITC's apparel business, bikes from TVS, and tractors from Eicher. We will look at this part of the equation in greater detail later. ITC is offering a very compelling proposition to these companies. But first, a look at how this place came up next to the

warehouse. It works like this. With its network of e-chaupals , ITC communicates its latest commodity prices to the farmers via the Internet or VSAT lines. If they find these attractive, they sell their produce to ITC. Listen to Rajesh Nigodia. He is the sanchalak (the person who operates an e-chaupal; most of them are farmers) of a small village called Mangawali, about 14 km away from Rafiqganj. He reckons that half the farmers in his village deal only with ITC. Now, by setting up the mall next to the warehouse, ITC is trying to monetise the footfalls from farmers. Agrees R. Nandkishore, director (marketing), Philips Lighting, which is selling its products in the mall: "ITC realised that the farmers had just got money, that they would spend it anyway, and that they had an empty vehicle with which they could lug the stuff back." As it were, prosperity in this area has been rising steadily. According to officials at the Nabard office in Bhopal, prosperity in this region has been rising for the past ten years - ever since farmers began switching to soya bean cultivation. Thanks to the information revolution catalysed by the chaupals, says a former ITC-IBD (international business division) employee, farmers are beginning to hold their stocks, knowing that there is an advantage in selling later. It helps that most of them grow soya, which is very inexpensive to store. In that sense, what ITC is doing with this warehouse is similar to what it did with its kiosks. In the first phase, having wired up the hinterland, it began using the network to enable a twoway flow of products and services to the rural economy. Working through the sanchalaks, ITC first pushed its own products, like salt, into the hinterland, and then invited others like Parachute and Philips to ride on this distribution chain. Today, it plans to similarly create revenue streams around its warehouses.

Products unlimited The rural mall sells everything from fertilisers and hair oil to mixer-grinders and tractors This time around, ITC is hoping to capture the rural folks' out-of-village shopping. The warehouse is one bulwark of its strategy, obviously. But the farmers will come here only after every harvest. To ensure that they keep coming to Chaupal Sagar even at other times, the company is offering a slew of other goodies. Another building is coming up next to the main warehouse. When completed, it will house a bank, a cafeteria, apart from an insurance office and a learning centre. ITC has tied up with agri-institutes to offer farmer training programmes. Then, plots of land have been earmarked to display large agricultural machinery like threshers. Other parcels of land have been earmarked for pesticide and

fertiliser companies for demonstrating their products. A petrol pump is coming up as well. The Great Rural Roadblock From his office in Delhi, rural marketing consultancy MART's Pradeep Kashyap has been keeping careful tabs on ITC's rural initiatives. "It (e-chaupal) is a very far reaching development. People don't appreciate just how important it is yet," he says, referring to the distribution model that the sanchalaks represent. Mind you, ITC has solved one of the biggest bugbears Indian rural marketers face. Take Philips Lighting. Riding on its own distribution network, it had reached all Indian villages with a population of 20,000, but could not go any deeper. It is simple arithmetic. Assume, says Nandkishore, that a village needs 200 bulbs. At an MRP of Rs 10 per bulb, that works out to Rs 2,000 and the company makes a gross margin of 5-7 per cent on these. Trouble is: to go deeper into the country, beyond the 20,000-population villages, Nandkishore would have to hire a van. Costing another Rs 50, that would blow a hole in his economics. It is a conundrum that all rural marketers are familiar with. And then, Philips got a call from ITC, which was looking for other companies to ride on its chain. Today, Philips' dealers in the 20,000-population villages supply to ITC, which sends a van to all its sanchalaks once every 15 days, dropping off their orders. Now, Philips' coverage is up to 50-60 per cent in these areas - up from 20 per cent two years ago. On their part, the sanchalaks either sell the goods directly, or, more often, sell them to the village's shopkeepers. Now, how does the mall change this equation? Well, for one, Philips only distributes its 60W and 100W bulbs through the sanchalaks. It is hard to get the more costly products, like energy-saving bulbs, placed in the village shops. They are too costly, and block up too much of the village kirana's working capital. Ergo, Philips plans to use the mall to showcase its entire range. At the same time, the basic products will continue to go to the village. As Nandkishore says: "Bulbs are bought only when the previous one fails. These need to be sold through the village."

The bigger picture Next to Chaupal Sagar, ITC is setting up a bank, a cafeteria and a learning room to offer more services to farmers Other companies are similarly gung-ho. To solve a similar problem in reach, Eicher Tractors

evolved a rental model. It gave about 50 tractors to the sanchalaks, who in turn lease them out to farmers. This is generating awareness, says the company's deputy general manager, N. Subramanian. Now, like Philips, Eicher plans to use the mall to showcase its entire range. TVS is also doing something similar. On its part, ITC is accepting stocks on a consignment basis. Carrying It Forward ITC is tentatively planning to open another 4-6 malls this year. No more than that. It will wait and see how the malls are received. According to BW sources, so far, the store has done OK. On the day before we visited the store, a Sunday, about 900 people had walked into the store. On weekdays, footfalls were ranging around 700. On the first day, says a senior manager at a company using the ITC network, the store notched up a business of about Rs 70,000-80,000. But, unlike the kiosks, higher investment goes into these stores. While ITC refused to comment on this article, investment on a rural mall is estimated to be around Rs 3 crore-5 crore. A lot is riding on how well ITC has gauged the rural consumer's buying patterns. It is hard to change villagers' buying habits, says a senior manager at one of the firms partnering ITC. Which is the point that Subramanian also makes. For the first six months after the company began offering tractors on rent, there was no offtake. They just sat dormant. But eventually, some people used them, word of mouth got generated, and rentals picked up gradually. Back at the store, it is late noon. In the shade, the temperature is around 35 degrees Celsius. Inside, a few men are walking around. It is interesting to watch them in the middle of their shopping experience - picking up FMCGs, biscuits, toothpastes and the like. Is it true what people say about the rural consumer? That it is the men who do all the shopping? And that the women aren't allowed to go out? And then, just as we are about to pack up and leave, a group of village women descend on the store. They spread out across the shop. Examining the FMCGs, then the cooking utensils, the refrigerators, the plasticware, and so on. And that is why Chaupal Sagar is an important experiment. It will throw up a lot of valuable, real-life data about the rural consumer. In the months to come, a lot of assumptions and myths will be tested here.

http://www.itcportal.com/about-itc/newsroom/press-reports/PressReport.aspx? id=627&type=C&news=CHAUPAL-SAGAR-Unlocking-rural-markets

The Village PeopleThe Economic Times (Brand Equity), 14 Jan 2004 NIDHI NATH SRINIVAS They say if at first you do succeed, try something harder. For ITC, it is the only way to live. After its ambitious e-choupal project which involves connecting 100,000 small villages to one Internet-based network, the cigarettes and hotels conglomerate now wants to enter the no mans land of bricks-and-mortar rural retailing. No more simply buying soya, shrimps, wheat and coffee from VSAT-savvy growers. ITC wants to sell to them too. As chairman YC Deveshwar summarises it: "ITC wants to create a high-quality low-cost fulfilment channel for rural India." The plan may seem overly ambitious but Deveshwar is not backing down. "The e-choupal was the first step in the last mile towards complete backward integration. But its also the first mile on a new information highway around which multiple suppliers and buyers can converge. It is transformational in its implications and can make a huge contribution towards rural well-being," he says. No other company is ready yet to invest in a multi-store chain selling a variety of items under one roof to Indian villages, so why is ITC going into overdrive? Says Deveshwar, "We have created a market. Now we are going to reap it. We are creating an entry barrier for everyone else." Two way traffic These lofty ambitions have not come easy or cheap. It has taken ITC three years and Rs 80 crore to journey this far down the dusty roads of rural marketing. Combining information technology, focused interaction, and eager villagers looking for income opportunities, the company has created a complex three-tier structure for selling. Establishing the first two tiers was the easy bit. The last and also the most visible is the new tier ITC is now adding to get farmers to go shopping outside their villages. The idea germinated when ITC realised that every time sanchalaks the local point man in ITC-speak and farmers visit its soybean factories in MP to sell their produce, they also have the opportunity to spend their freshly earned cash. Encouraged by its image as a fair and reliable buyer of farm produce, ITC decided to invest in 5-acre malls, costing between Rs 3-5 crore each, across 15 states. The first five four in Madhya Pradesh and one in UP will be inaugurated by March 2004, says S Sivakumar, chief executive of ITCs International Business Division and the mastermind behind echoupal. ITC wants to use these malls for products like bikes, tractors, clothing, cement, steel, diesel and financial products. To keep its own investment to the minimum, ITC is encouraging the

samyojak a local broker or middleman co-opted by ITC to pick up equity and manage these shops as part-owners. Assisted by four ITC salesmen, the samyojaks will assess demand, ensure just-in-time delivery, manage customer service and keep accounts. ITC claims that the models uniqueness lies in the fact that it works equally well for ITC as the buyer of farm produce and ITC as the seller of desirables. "Because it is a fundamentally profitable business model, it has the ability to be scaled up," says Sivakumar. Even experts in retailing are giving it the thumbs-up, at least for now. Says Anil Rajpal, manager at KSA Technopak, "It is definitely a pioneering venture because no other Indian company has yet entered rural retailing with the all-under-one-roof concept." But simply building a mall is not enough to bring in customers. So ITC is trying to position itself with farmers as the much-needed alternative to the network of local dealers or wholesalers, peddling over-priced products of suspect quality. Village grocers will get delivery at their doorstep, minus the hassle of quality checks. For companies finding it hard to reach out more than once in six months to customers in small villages, ITC is offering a ready-made channel for niche advertising, micro-marketing and distribution. It is just as attractive for companies who want to provide customer service minus the cost. Eicher, for instance, will be training sanchalaks in motorcycle repair and maintenance in their village itself. Pesticide and seed companies will be training them on proper usage. ITC will also be selling its e-choupal data to interested food and beverage companies. Impressed by the potential of the enterprise and ITCs own confidence, 55 companies have already signed up for pilot projects in different states. Says PS Dravid, president, JK Genetics Seeds, "We are using e-choupal as an additional marketing channel because of its proximity to farmers and the accurate information it generates about farmer preferences. This allows us to position the right quantities at the right time." But while everyone agrees that ITCs rural retailing model is brilliant in theory, the crucial question is whether it will work in practice. After all, a rural customer base is not just the number of villages multiplied by their population. The economic health of the area is a major factor unless malls are located in high-income agricultural corridors, profits are likely to be distant. More importantly, everything hinges on the probity and enterprise of the sanchalaks ITC selects. Ultimately, it is this last mile connectivity where ITC is most vulnerable. Given that the sanchalak is not an ITC employee, it might be difficult to exercise control over him. ITC is also assuming that if you have their hearts and minds, wallets will follow. But that may not necessarily be true. "When it comes to once-in-a-while purchases like motorcycles, tractors and even steel, villagers dont mind going to the nearest big town to shop around. ITC will be offering just a couple of brands of each item and is unlikely to be the first stop for these purchases," say industry watchers. Another problem that ITC could face is that while farmers may come in to sell their produce, for eight months of the year, that wont happen. Plus, given its fixed costs, there is the additional anxiety of generating adequate volumes. Lastly, for suppliers there is the issue of flexibility in pricing and the danger of alienating existing distribution. A company wholesaler or dealer can offer spot discounts or

create an attractive package for a loyal customer or reel in new buyers. ITC malls will have no such flexibility. But the company is confident its formula will work. "We are telling our suppliers not to get caught in the dealers game of higher and higher discounts," says marketing head, Shailendra Tyagi. Experts say the hurdle of customer choice can be overcome with significantly superior customer service. "ITC offers trust and service to villagers which could compensate for lack of choice," says Rajpal of KSA Technopak. Meanwhile, what about ITCs shareholders? The company is reluctant to talk numbers yet. ITC is prepared for a long gestation period, says chairman Deveshwar. "There is no crystal ball. Im simultaneously patient and impatient. I know it will take a while before results show. But Im also impatient to see its transformational impact on rural well-being," he points out. According to Sivakumar, ITC is expecting a four-year pay-back period. "Though the venture as a whole may take a while to become profitable, individual stores will definitely break even faster," he says. But market analysts are not so sanguine. After all it is impossible to ignore the fate of ITCs recent forays into segments like clothing, greeting cards, and foods. "ITC has no strength in retailing and this is another questionable move by the company," say analysts at a leading brokerage house. Deveshwar, however, believes that as it did with paper, ITC will once again prove the Cassandras wrong. "We are quite clear it is a worthwhile venture. It also has the potential to reward shareholders for their trust," he says. Who knows, it could be a runaway success like Wills cigarettes, or a flop like its ready-to-eat meals. But success or failure, one thing is certain, if its to do with ITC, either would be equally spectacular. Two Tiers Down Today, ITCs first contact with consumers is at the village level, where the sanchalak the local point man in ITC-speak aggregates demand for products through orders placed by his neighbours. The sanchalak then emails the order to ITC, and the items are either picked up by the sanchalak at the ITC warehousing hub, or delivered by the samyojak a local broker or middleman co-opted by ITC to the villages. The sanchalak then collects cash payments from his neighbours and remits them to ITC. Seed and fertilisers of companies like JK Genetics, Mahyco and BASF, to name a few, are being sold in this way. "To avoid clogging up our channels with too many or irrelevant agri-inputs, ITC chooses from the range being offered by these companies. So in MP we are selling seeds of wheat, soya, hybrid rice and vegetables only," says Shailendra Tyagi, head of marketing in ITCs International Business Division. The second tier does not involve any prior orders. Instead, the sanchalak buys products based on estimated demand and stocks them in his home. They are later sold to both the

local grocer and village households. Products sold this way are again procurred by either sanchalak pickup or samyojak delivery. This system is most effective for consumer goods such as salt, matchboxes, soyabean oil, and confectionery items. So ITC brands like Aashirvaad salt and atta, Candyman and Minto confectionery, and Aim matchboxes are all being sold through this route and both the company and the sanchalak earn a fee from any sales. http://www.itcportal.com/about-itc/newsroom/press-reports/PressReport.aspx? id=621&type=C&news=The-Village-People

The Crop Shop - From toothpaste to tractors, this rural mall has it allOutlook, 04 Oct 2004 Rafiqganj, about four kilometres from Sehore town in Madhya Pradesh, is not a city, nor even a onehorse town. It is a little village...except that it boasts of having the first rural shopping mall in the country. Chaupal Sagar, set up by cigarette giant ITC, stands on an eight-acre plot with a shopping area of 7,000 square feet. Along with soaps, detergents and toothpaste, the mall sells almost everything TVs, DVD players, pressure cookers, room heaters, watches, sewing machines and grinders. And, of course, cigarettes. Farmers can also buy motorbikes, or even tractors. ITC has launched its own rural range of clothing and shoes too trousers at Rs 166 a pair tailored for the village folk. The mall seems to be doing brisk business. Though its launch is in the first week of October, it has informally opened its doors to buyers. ITC says the daily sales is already between Rs 70,000 to 80,000. TVs and DVD players are among the costlier items that have found rural customers. "The idea is to create a one-stop destination for farmers," says S. Shivkumar, chief executive officer of ITC. Chaupal Sagar is a bit different from city malls. What had started four years ago as an experiment to use IT tools to enable farmers find the best price for their produce has now metamorphosed into this shopping idea. The scenario ITC foresees is something like this: post-harvest, the farmer, with his family, drives into Chaupal Sagar in a tractor trolley laden with the grain he proposes to sell. He parks the tractor on the digital weighing bridge close to the entry point. His grain weighed, he drives on to the godown where the produce is

unloaded and he gets his money. Meanwhile, his kids can enjoy the swings and video games and his wife may be going around the shopping mall mentally drawing up a shopping list. Cash in hand, the farmer family can then make its purchases and drive back by evening, with the tractor laden with the goodies. If they like, they can have a bite in the cafeteria. And the farmer may even carry fertilisers and pesticides for the next crop and get his tractor fuelled at the diesel pump. The villagers are delighted at the new shopping experience. But the key question will be whether they will show interest once the novelty factor wears out. "I will definitely come here with my family," says 65-year-old Kaluram from Piparia who has come just to "have a look." Sunil, 12, walks confidently to one of the racks where his favourite biscuits are stacked. Sunil is no city-bred kid, he lives in a small hamlet. If he is not overawed by the sprawling mall, it is because he is a regular visitor. "I come here practically everyday while on my way back from school," he says. The shopping area is only a part of the vast Chaupal Sagar. At the back of the mall is a godown where ten thousand tonnes of grain can be stored. Then, the entertainment area with video games and swings. A diesel pump, a cafeteria and a soil-testing laboratory are also coming up and so is a sale point for fertilisers, pesticides and other agro-inputs. A bank, an insurance company office and a training centre for farmers will complete the set-up. If he needs to, the farmer can consult a doctor who will be available on the premises. According to ITC, the Chaupal Sagar is the logical culmination of the e-chaupal scheme launched by the company in Madhya Pradesh. These e-chaupals were small units set up to help farmers. Typically, each unit has a Rs 2 lakh infrastructure including a computer, a ups and a telephone line for logging on to the internet. A room in the house of a mediumlevel farmer usually served as the e-chaupal. The sanchalak as this farmer would be designated provides free information to the others about the prices and demand for agriculture produce in different mandis.The sanchalaks got a commission when a farmer sold his produce to ITC. The experiment started with four e-chaupals. Presently there are 1,700 units in 26 districts. It is the success of these farmer-run centres that made ITC think about launching the Sagar Chaupal which would serve as a organised retail outlet. According to ITC, fast moving consumer goods and white goods manufacturers are keen to tap the fast prospering rural markets. If the Chaupal Sagar set up at a princely cost of Rs 4.5 crore succeeds, then ITC has plans to set up five rural malls in Madhya Pradesh by next March. But the proof will be in the volume of sales. In the metros many malls are doing slack business with more window-shoppers than buyers. Will the rural populace of Sehore be any different?

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ITC plans to up rural market penetrationEconomic Times, 25 Aug 2007 BETTING big on the farm sector, ITC is planning to increase its penetration in the rural areas. As part of this plan, the company will introduce a small hypermarket format in select states with an investment of around Rs 80 crore. It will also open more e-choupal kiosks. The company believes that these initiatives will help farmers in less developed markets like Uttar Pradesh, Madhya Pradesh, Rajasthan and Maharashtra to get a better return for their produce. We are planning to increase our farmer service centres in rural areas (e-choupal kiosks) from the present 6,450 to 20,000 by 2012. We are looking at setting up 40 small hypermarkets in the first phase on the similar lines of our existing hypermarket model Choupal Sagar next year at an investment of Rs 2 crore each. In the second phase we will add 30 new small hypermarkets, said, S Sivakumar, chief executive (agri business division), ITC. While the big format Choupal Sagar occupies an area of about 6 acres to 10 acres, the small centres will be spread about 2 acres. This is expected to help marginal farmers as it will provide them a smaller catchment area to market their produce. The model will also help bring down operational cost, said Sivakumar. Talking to reporters on the sidelines of Custommerce, an industry event focusing on customer management, he said, the new initiatives will be targeting states, where the back-end operations and farm marketing are yet to evolve. For states such as Andhra Pradesh, Punjab and Karnataka, we have a different strategy. In these states, our focus will be on horticulture and Choupal Sagars and kiosks will help us improving the farm to market lineage. Besides, in coastal districts of AP, we are also helping farmers to take up aquaculture, he said. These initiatives, he said, would also help the company achieve higher export returns. These kiosks are mainly information centres, where farmers can access information on foreign market requirements, traceability norms and other quality criteria. Also, we sell financial products including crop insurance to farmers. This will trigger them to adopt slightly risky but high return crops and farming practices like organic cultivation methods, he said. The company had earmarked to spend Rs 5,000 crore on its echoupal division since its inception in 2,000. It is still ploughing back money into the system though some of these

centres have become selfsustainable. The plan is to continue to invest till 2012. We expect this venture to bring in returns after the expansion is completed, he said. http://www.itcportal.com/about-itc/newsroom/press-reports/PressReport.aspx? id=374&type=C&news=ITC-plans-rural-market-penetration

E-ChoupalThe Big Picture: ITC's Agri Business Division, one of India's largest exporters of agricultural commodities, has conceived e-Choupal as a more efficient supply chain aimed at delivering value to its customers around the world on a sustainable basis. The e-Choupal model has been specifically designed to tackle the challenges posed by the unique features of Indian agriculture, characterised by fragmented farms, weak infrastructure and the involvement of numerous intermediaries, among others. The Value Chain - Farm to Factory Gate:

'e-Choupal' also unshackles the potential of Indian farmer who has been trapped in a vicious cycle of low risk taking ability > low investment > low productivity > weak market

orientation > low value addition > low margin > low risk taking ability. This made him and Indian agribusiness sector globally uncompetitive, despite rich & abundant natural resources. Such a market-led business model can enhance the competitiveness of Indian agriculture and trigger a virtuous cycle of higher productivity, higher incomes, enlarged capacity for farmer risk management, larger investments and higher quality and productivity. Further, a growth in rural incomes will also unleash the latent demand for industrial goods so necessary for the continued growth of the Indian economy. This will create another virtuous cycle propelling the economy into a higher growth trajectory.

The Model in Action: Appreciating the imperative of intermediaries in the Indian context, 'e-Choupal' leverages Information Technology to virtually cluster all the value chain participants, delivering the same benefits as vertical integration does in mature agricultural economies like the USA. 'e-Choupal' makes use of the physical transmission capabilities of current intermediaries aggregation, logistics, counter-party risk and bridge financing -while disintermediating them from the chain of information flow and market signals.

With a judicious blend of click & mortar capabilities, village internet kiosks managed by farmers - called sanchalaks - themselves, enable the agricultural community access ready information in their local language on the weather & market prices, disseminate knowledge on scientific farm practices & risk management, facilitate the sale of farm inputs (now with embedded knowledge) and purchase farm produce from the farmers' doorsteps (decision making is now information-based). Real-time information and customised knowledge provided by 'e-Choupal' enhance the ability of farmers to take decisions and align their farm output with market demand and secure quality & productivity. The aggregation of the demand for farm inputs from individual farmers gives them access to high quality inputs from established and reputed manufacturers at fair prices. As a direct marketing channel, virtually linked to the 'mandi' system for price discovery, 'e-Choupal' eliminates wasteful intermediation and multiple handling. Thereby it significantly reduces transaction costs.

'e-Choupal' ensures world-class quality in delivering all these goods & services through several product / service specific partnerships with the leaders in the respective fields, in addition to ITC's own expertise. While the farmers benefit through enhanced farm productivity and higher farm gate prices, ITC benefits from the lower net cost of procurement (despite offering better prices to the farmer) having eliminated costs in the supply chain that do not add value.

The Status of Execution:

Launched in June 2000, 'e-Choupal', has already become the largest initiative among all Internet-based interventions in rural India. 'e-Choupal' services today reach out to over 4 million farmers growing a range of crops - soyabean, coffee, wheat, rice, pulses, shrimp - in over 40,000 villages through 6500 kiosks across ten states (Madhya Pradesh, Haryana, Uttarakhand, Karnataka, Andhra Pradesh, Uttar Pradesh, Rajasthan, Maharashtra, Kerela and Tamil Nadu). The problems encountered while setting up and managing these 'e-Choupals' are primarily of infrastructural inadequacies, including power supply, telecom connectivity and bandwidth, apart from the challenge of imparting skills to the first time internet users in remote and inaccessible areas of rural India.

Several alternative and innovative solutions - some of them expensive - are being deployed to overcome these challenges e.g. Power back-up through batteries charged by Solar panels, upgrading BSNL exchanges with RNS kits, installation of VSAT equipment, Mobile Choupals, local caching of static content on website to stream in the dynamic content more efficiently, 24x7 helpdesk etc. Going forward, the roadmap includes plans to integrate bulk storage, handling & transportation facilities to improve logistics efficiencies. As India's 'kissan' Company, ITC has taken care to involve farmers in the designing and management of the entire 'e-Choupal' initiative. The active participation of farmers in this rural initiative has created a sense of ownership in the project among the farmers. They see the 'e-Choupal' as the new age cooperative for all practical purposes. This enthusiastic response from farmers has encouraged ITC to plan for the extension of the 'e-Choupal' initiative to altogether 15 states across India over the next few years. On the anvil are plans to channelise other services related to micro-credit, health and education through the same 'e-Choupal' infrastructure. Another path-breaking initiative - the 'Choupal Pradarshan Khet', brings the benefits of agricultural best practices to small and marginal farmers. Backed by intensive research and knowledge, this initiative provides Agri-extension services which are qualitatively superior and involves pro-active handholding of farmers to ensure productivity gains. The services are customised to meet local conditions, ensure timely availability of farm inputs including credit, and provide a cluster of farmer schools for capturing indigenous knowledge. This initiative, which has covered over 70,000 hectares, has a multiplier impact and reaches out to over 1.6 million farmers.

http://www.itcportal.com/itc-business/agri-business/e-choupal.aspx

e-Choupal: Networking rural IndiaNDTV.com, 17 May 2007 Agriculture is vital to India. It produces 23 per cent of the GDP, feeds a billion people, and employs 66 per cent of the workforce. Because of the Green Revolution, India's agricultural productivity has improved to the point that it is both self-sufficient and a net exporter of a variety of food grains. Yet most Indian farmers have remained quite poor. The causes include remnants of scarcity-era regulation and an agricultural system based on small, inefficient landholdings. The agricultural system has also traditionally been unfair to primary producers. Farmers have only an approximate idea of price trends and have to accept the price offered to them at auctions on the day that they bring their grain to the mandi. As a result, traders are well positioned to exploit both farmers and buyers through practices that sustain system-wide inefficiencies. One of India's foremost private sector companies, which has a diversified presence in tobacco, hotels, paperboards, specialty papers, packaging, agri-business, branded apparel, packaged foods and other fast moving consumer goods, initiated e-choupal in 2000. The effort placed computers with Internet access in rural farming villages. The e-choupals serve as both a social gathering place for exchange of information (choupal means gathering place in Hindi) and an e-commerce hub. Industry background Spurred by India's need to generate foreign exchange, ITC's International Business Division

(IBD) was created in 1990 as an agri-trading company aiming to "offer the world the best of India's produce". Initially, the agricultural commodity trading business was small compared to international players. By 1996, the opening up of the Indian market had brought in international competition. Large international companies had better margin-to-risk ratios because of wider options for risk management and arbitrage. For an Indian company to replicate the operating model of such multinational corporations would have required a massive horizontal and vertical expansion. In 1998, after competition forced ITC to explore the options of sale, merger, and closure of IBD, ITC ultimately decided to retain the business. The Chairman of ITC challenged IBD to use information technology to change the rules of the game and create a competitive business that did not need a large asset base. Today, IBD is over Rs 700 crore company that trades in commodities such as feed ingredients, food-grains, coffee, black pepper, edible nuts, marine products, and processed fruits. What began as an effort to re-engineer the procurement process for soy, tobacco, wheat, shrimp, and other cropping systems in rural India has also created a highly profitable distribution and product design channel for the Company. E-choupal has also established a low-cost fulfillment system focused on the needs of rural India that has helped in mitigating rural isolation, create more transparency for farmers, and improve their productivity and incomes. The business model The model is centered on a network of e-Choupals that serve both as a social gathering place for exchange of information and an e-commerce hub. A local farmer acting as a sanchalak (coordinator) runs the village e-Choupal, and the computer usually is located in the sanchalak's home. ITC also incorporated a local commission agent, known as the samyojak (collaborator), into the system as the provider of logistical support. ITC has plans to saturate the sector in which it works with e-Choupals, such that a farmer has to travel no more than five kilometers to reach one. The company expects each e-Choupal to serve about 10 villages within a five-kilometer radius. Today its network reaches more than a million farmers. In the Mandi, the following operational process was followed: Inbound logistics > Display and Inspection > Auction > Bagging and weighing > Payment > Outbound logistics. E-choupal brought about a strategic chage to the process: Pricing > Inbound logistics >

Inspection and grading > Weighing and payment > Hub logistics. Goals envisioned Two goals were envisioned for information technology in the e-Choupal process. The first was the deelivery of real-time information independent of the transaction. In the mandi system, delivery, pricing, and sales happen simultaneously, thus binding the farmer to an agent. E-Choupal was seen as a medium of delivering critical market information independent of the mandi, thus allowing the farmer an empowered choice of where and when to sell his crop. The second was to facilitate collaboration between the many parties required to fulfill the spectrum of farmer needs. As a communication mechanism, this goal is related to the commitment to address the whole system, not just a part of the system. It is noteworthy that ITC did not hesitate to install expensive IT infrastructure in places where most people would be wary of visiting overnight. It is a manifestation of the integrity of rural value systems that not a single case of theft, misappropriation, or misuse has been reported among the thousands of e-Choupals. Sustainability through mutual respect The e-Choupal model has shown that a large corporation can combine a social mission and an ambitious commercial venture; that it can play a major role in rationalising markets and increasing the efficiency of an agricultural system, and do so in ways that benefit farmers and rural communities as well as company shareholders. ITC's example also shows the key role of information technology - in this case provided and maintained by a corporation, but used by local farmers - in helping to bring about transparency, to increase access to information, and to catalyse rural transformation, while enabling efficiencies and low cost distribution that make the system profitable and sustainable. 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 retaining the integral importance of local partners, the company's commitment to transparency, and the respect and fairness with which both farmers and local partners are treated. The sustainability of the engagement comes from the idea that neither the corporate nor social agendas will be subordinated in favor of the other.

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Lintas Media arm, e-choupal join to launch Bharat Barometerblonnet.com, 08 Aug 2006 Primary info source of all aspects of rural consumer behaviour Farmers on Net e-choupals serve as a social gathering place for exchange of information and also an ecommerce hub for over 3.5 million farmers. Mumbai ITC's e-choupal and Intellect, the research and technologies wing of the Lintas Media Group, have joined hands to launch the Bharat Barometer - the primary information source on all aspects of rural consumer behaviour. The Bharat Barometer is a research channel for exploring various rural consumer and market matters. Untapped sector Ms Lynn de Souza, Director, Lintas Media Group, of which Intellect is the Research wing, said, "Today in the competitive rush for new customers - brands are exploiting new segments, attempting new strategies, pushing to increase the product usage and bringing out new variants.

"The difficult to reach rural masses are gaining importance each day. Brands heading in the direction are confronted with limited knowledge that places obstacles in their path to success in the rural market place. "With this initiative, it will become very simple to track and obtain crucial inputs from this rural segment and I'm sure this will become a very important fact-finding tool for marketers across." Fact-finding tool According to Mr Shailendra Tyagi, Vice-President - Marketing, ITC Ltd-IBD, "ITC's echoupal carries with it a rich legacy of trust and transparency with rural India. It is this unique relationship and e-choupal's credibility with Indian farmers that enables us to gather critical information which otherwise isn't readily shared through traditional research." ITC's e-choupal is an Internet-based information sharing network inspired from the traditional choupal concept where villagers would meet for knowledge sharing. Multipurpose Today the e-choupals serve as both a social gathering for exchange of information and an ecommerce hub for over 3.5 million farmers. Each choupal network is looked after by a host farmer called the "Sanchalak" and coordinates with an average of 600 farmers in four or five surrounding villages in a five km radius.Currently there are over 6,000 e-choupal networks spread across seven States.

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Fuelling latent rural demandEconomic Times, 07 Jul 2006 ITCS e-choupal, a universal platform for rural India, is a very successful case study taught at Harvard and Michigan Schools. Management gurus CK Prahalad and Venkat Swami cite the e-choupal example to explain co-creation. Almost every other day, an ITC executive is making a presentation on this initiative somewhere in the world. The initiative has won the Stockholm Challenge award apart from several others. What was conceived as an effective supply chain delivery for its agri commodity business soon evolved into a universal platform for rural India with a basket of goods, services and most critical of all, information access. All these have capabilities to bring about life-altering changes. The e-choupal model has helped to meet challenges posed by Indian agriculture, characterised by fragmented farms, weak infrastructure and the involvement of numerous intermediaries. Today, the platform literally connects rural India to the world. It gives the farmer access to weather reports customised for his region, lends best farming practices, provides goods and services like farm implements, fertilisers to banking and insurance products at his doorstep. And the basket of services continues to expand. The problems encountered by ITC in setting up and managing these echoupals included inadequacies in power supply, telecom connectivity and bandwidth. Resistance from middlemen and imparting skills to firsttime internet users in remote areas were the other

difficulties. ITC (agri business division) CEO S Sivakumar, who is the chief architect of the echoupal project, said: The challenge now is to sustain this innovation. The scope of e-choupal has gone way beyond its blueprint like Choupal Sagar, the rural retail chain, which was not part of the original plan. Going forward, the role and shape of echoupal will continue to evolve in line with the ideations of the e-choupal community of end-users itself, he added. In the future, services like health, education and business process outsourcing could be added to the e-choupal ambit. Mr Sivakumar chose to call the e-choupal a business initiative with a social collateral. The echoupal, which has witnessed capex of Rs 200 crore and revenue expenditure of Rs 150 crore, could see outlays of Rs 5,000 crore over the next five to seven years. Unlike a traditional organisation where the top management is the visionary and junior management executes the mission, the e-choupal community of 40,000 frontline beneficiaries and end users work together. New business models and services have been added to the basket as a result of an unmet need expressed by the community. ITCs key role is to provide orchestration infrastructure or synthesising these experiments. Mr Sivakumar said the e-choupal essentially works on four pillars of digital infrastructure (IT, internet access), physical infrastructure (Choupal Sagars), human infrastructure (sanchalaks and sanyojaks) and network orchestration by ITC. As an intermediary, ITC has brought a network of insurance companies, banks, micro-finance entities, seed and fertiliser companies, FMCG, elearning and training organisations to the doorstep of rural India. Launched in June 2000, e-choupal is largest initiative among all internetbased interventions in rural India. Its services reach out to over 3.5 million farmers growing a wide range of crops soyabean, coffee, wheat, rice, pulses, shrimp in over 31,000 villages through 5,200 kiosks across six states of Madhya Pradesh, Karnataka, Andhra Pradesh, Uttar Pradesh, Maharashtra and Rajasthan.

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ITC holds out mall hope for villagersThe Telegraph, 04 Jul 2005 SAMBIT SAHA Swanky malls and hypermarts have changed the way urban India shops today. However,

millions of rural people still depend on kirana shops. But not any more. If ITC is ready to walk the talk, miniature malls will dot the rural landscape of our country. The Calcutta-based conglomerate has already introduced the model in a little-known place in Madhya Pradesh. It now wants to ramp up the number to 30 in the next 12-18 months. Spread out over 7,000 square feet, Choupal Sagar - as the hypermarket is called - has created ripples with new shopping experience for rural consumers. The model is unique as the place will double up as a shopping centre and a farmer facilitation unit providing facilities like training, soil testing, health clinics, cafeteria, bank, investment counters and fuel stations. The company will spend about Rs 5 crore on each of these establishments. The rural malls are linked to its e-choupal network. So far, it has set up 5,200 e-choupals for over 3 million villagers living in 31,000 villages. The e-choupal network has been set up in Madhya Pradesh, Uttar Pradesh, Rajasthan, Karnataka, Maharastra, Andhra Pradesh and Kerala. The first hypermart in Madhya Pradesh is connected to an e-choupal. A farmer, who comes to sell his agricultural produce through the e-choupal also has the option to buy almost anything he wants. The rural mall sells everything from fertilisers and hair oil to mixer-grinders and tractors. To make sure that farmers keep coming to the mall even when they do not have to sell any produce, support services are in place like health clinics, cafeteria, bank, and investment counters. http://www.itcportal.com/about-itc/newsroom/press-reports/PressReport.aspx? id=437&type=C&news=ITC-holds-out-mall-hope-for-villagers

Rewarding resourcefulness, lifting livesThe Hindu Business Line, 02 Jul 2005 G. Ramachandran Distance, social discrimination and formal regulations often keep small and poor farmers out of the market. The e-choupal scheme initiates a reversal in this trend and empowers the farmer by providing reliable information and access to markets where they can get competitive prices for their produce says G. Ramachandran.

The e-choupal scheme: Empowering the small farmer instead of exploiting poverty. INDIA'S farm sector is a source of explicable embarrassment as well as unbounded opportunity. The causes for the embarrassment are obvious. The farm sector is wholly rural; the rural economy is starkly poor. And, most Indian households are simultaneously rural and poor. They constitute 72 per cent of the population and account for 75 per cent of the poor. Moreover, rural households account for 75 per cent of the country's workforce. The principal descriptors and indicators given above have changed for the better over the last four decades, but only marginally. There is little evidence of any tidal wave of improvement or development. This is embarrassing given that the Green Revolution is about four decades old. So, India's poor, India's farmers and India's villagers need something that generates hope and incomes. They need something that goes beyond arcane issues such as food security and genetics. They need something with which they can tap their resourcefulness and lift their livelihoods. They need something simple, local and people-friendly to heave themselves out of a deep hole. If you have known all along or have inferred that the poor, the farmers and the villagers are the same people, then it is easy to regard the farm sector as the source of unbounded opportunity. ITC's e-choupal has done exactly this since June 2000. It regards poverty, farming and rural livelihoods as interrelated issues. It regards rural poverty as the result of how rural society and the rural economy are structured. E-choupal is simple and people-friendly. But the e-choupal initiative is not local. It includes 5,250 e-choupals in 31,000 villages in six States. It serves three million farmers. It has brightened their prospects of higher incomes. It has delivered on all the promises made. Thereby, it has enabled more than three million households to lift themselves out of poverty over the last five years. Lightning quick E-choupal is characterised by a high-impact, low-inertia business model. It is significant in

that its economic vigour is wholly predicated on the resourcefulness of the people it serves. Its relevance is unrelated to resources. Therefore, it has rapidly impacted the whole agricultural chain seed to harvest to prices to market to money in the bank in the locales it serves. Since e-choupal is people-friendly and dependent on resourcefulness, the intended benefits have reached its beneficiaries at lightning speed. The first round of empirical analysis of the impact of e-choupal shows that incomes from farming and support services have risen by over 38 per cent since 2000. In particular, a survey by Prof Sanjiv Phansalkar of the Institute for Rural Management, Anand shows that incomes from farming have risen by about 10 per cent in 2004 alone in locales served by e-choupal.

Depressing contrast By contrast, India's agricultural sector has grown at less than 1.5 per cent in the first three years of the Tenth Plan, which had set an ambitious growth target of 4 per cent for agriculture. The Prime Minister, Dr Manmohan Singh, has drawn attention during the 51st meeting of the National Development Council, to the depressing deceleration in growth since the mid1990s. Agriculture had grown at 3.2 per cent between 1980 and 1996. It slowed down to 2.1 per cent during the Ninth Plan. The Prime Minister has said that it is not surprising that a perception has grown that the benefits of growth have bypassed a substantial section of our people. It may be fair to add that agricultural growth may have bypassed locales not served by e-choupal. Candid and ambitious The Prime Minister has chosen to discuss the problems facing agriculture squarely and boldly. To start with, he has not blamed the monsoons. He has asserted that the problems with agriculture go beyond weather and that there has been a loss in momentum. He is of the view that a deeper problem affects India's agricultural strategy. He has asserted that correcting the deeper problemmust be accorded highest priority. Though the Prime Minister has not explicitly presented poverty, agriculture and rural livelihoods as interrelated issues, he has presented agriculture as a chain of related activities. He has called for action on several fronts for overcoming the stagnation in agriculture. He has called for focus and attention. Quite unsurprisingly, he has presented the case for an increase in investments in the entire chain of activities related to agriculture the supply of inputs and credit, diversification of crops, better production practices and improved postharvest management. The Prime Minister has called for toning up the agricultural credit system towards ensuring supply of adequate credit at a reasonable cost. Problem redefined It is an old habit in India to see every economic problem as the result of a shortage of capital and investments. If the availability of capital is not the issue, the interest rate is. So, the

prescription for solving every economic problem is the same: Massive investments at low interest rates. It is not surprising that many economic problems have remained unsolved for decades. E-choupal does not see India's agrarian and rural poverty as the result of capital shortage. It does not place any significant emphasis on massive investments for solving the problem of rural and agrarian poverty. E-choupal has correctly regarded India's agrarian and rural poverty as the result of a cruel situation faced by India's small and poor farmers, which forces them to operate and transact in `un-evolved' markets. Farmers and rural households remain uninformed or inadequately informed in these un-evolved markets because of adverse societal and economic structures. Two examples come to mind. First, many farmers do not have access to information on the lowest price to pay for an input. Second, most do not have access to information on the highest price at which they can sell their output. Farmers and rural households lose out in the information dimension. So, farmers pay higher prices for their inputs and receive lower prices for their output compared with the best. The result is lower incomes and listless livelihoods. Farmers lose out in the transaction dimension too. Again, two examples come to mind. First, many farmers may not have access to the markets that sell inputs at the lowest prices. Distance, informal social codes and formal regulations often keep small and poor farmers out of the markets for low-cost, high-quality inputs. Second, many farmers may not have access to the markets that pay them the highest prices. Distance, social discrimination and formal regulations often keep small and poor farmers out of the markets that pay the highest prices for their high-quality output. So, once again, farmers buy inputs at very high prices. They sell their output at very low prices. The mandi exacerbates the latter problem (see Business Line, December 28, 2004). The result is lower incomes, crushed hopes and poor growth. Problem solved E-choupal applies information technology to the advantage of India's small and poor farmers who have hitherto operated and transacted in un-evolved markets. It solves the value-sapping problems caused by distortion of information and distance to markets. First, it provides access to reliable and high-quality information on the weather, inputs, produce, markets and prices free of cost to farmers. Second, it provides access to markets that sell high-quality inputs at the lowest possible prices. Third, it provides access to markets where buyers pay the highest possible prices for farm produce. Shining results E-choupal has favourably impacted the chain of activities related to agriculture. Produce quality and volumes have risen. Prices of farm inputs have declined and quality of inputs has risen. Prices of farm output have risen. Small and poor farmers have been the principal beneficiaries. Their cost of transactions has declined. Their incomes have risen. What is more, small and poor farmers have typically derived these benefits within three months of the arrival of the e-choupal in their locales. They have not had to wait for plans,

approvals, massive investments and mid-term appraisals.The reasons are obvious. E-choupal rewards resourcefulness. It does not exploit poverty. It empowers the small farmer. It has reversed the traditional sequence of development. The traditional sequence of development has plans, approvals, massive investments, mid-term appraisals, poor growth and frustration. By contrast, e-choupal begins with frustration with the traditional sequence and ends with hope, fulfilment and growth.

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e-choupal to cast the rural Net wideBusiness-standard.com, 02 Jun 2005 The ITC e-choupal network aims to cover over 100,000 Indian villages, representing a sixth of rural India and linking up more than 10 million farmers, over the next decade. ITC today won the 'Corporate Social Responsibility Award 2004' from The Energy and Resources Institute (Teri) for its e-choupal initiative. The award is designed to encourage social responsibility processes within the corporate sector. ITC e-choupal, an information technology-based intervention in rural India, has already received several national and international awards as a transformation model for rural India. ITC e-choupal has earlier won the 'World business award' instituted in support of the United Nations' Millennium Development Goals and also the Wharton-Infosys 'Enterprise business transformation award 2004' for the Asia-Pacific region. The curriculum of the Harvard Business School now includes a case study on the ITC echoupal movement and how it is transforming Indian agriculture. ITC, as one of the first Indian companies to pioneer the concept of triple bottomline reporting, covering not only economic dimensions, but also the environmental and social dimensions of business. ITC said in a relase that its sustainability report was the only one in India certified to be fully in accordance with global reporting initiative (GRI) guidelines. The ITC e-choupal network empowers over 3.1 million farmers at present, enabling them to readily access crop-specific, customised and comprehensive information in their native language via vernacular websites, on each agricultural crop that ITC deals in and even to marginal farmers. Farmers can access prevailing Indian and international prices and price trends for crops, along with expert knowledge on best farming practices and micro-level weather forecast. This

improves decision-making ability at the rural level, helping align agricultural production better to market demand and upgrade quality and productivity. The e-choupal model also helps aggregate demand and creates a virtual producers' cooperative, which in turn allows access to higher quality farm inputs at lower costs. The ITC echoupal network has also created a two-way direct marketing channel for rural India, eliminating wasteful intermediation and multiple handling. The reduces transaction costs and improve logistical efficiency. http://www.itcportal.com/about-itc/newsroom/press-reports/PressReport.aspx? id=452&type=C&news=e-choupal-cast-rural-net-wide