ICFAI NATIONAL COLLEGE

AHMEDNAGARA LIVE PROJECT REPORT

“To study The ITC’s e-Choupal: Taking e-Business to Farmer”

Submitted to

ICFAI UNIVERSITY

IN THE PARTIAL FULFILLMENT OF THE

Master of Business AdministrationMaster of Business Administration

SUBMITTED BY

Pokharna Ronak

Enrollment No-7NBAD136

CONTACT NO. 09850697895

UNDER THE GUIDENCE OF

PROF. JAYPAL DHOBLE.

CERTIFICATE

This is to certify that below signed has completed a project

study on ‘ITC’s e-Choupal, Taking e-Business to Farmers’

successfully under my guidance and supervision. This work is

original in conception and collected data will be used only for

academic purpose.

Place: Ahmednagar Mr. Jaypal DhobaleDate: 12/02/08 (ESM Faculty Guide)

INDEX

Sr. No. TOPICS

1) Objective of case study and project

2) Introduction

3) Background note of company

4) Facts and observation

5) Problem resolution and challenges

6) Expansion spree

7) Key learning

OBJECTIVE

1. Understanding e-Choupal concept which, implement in practical market by ITC

Ltd.

2. To know e-business concept & in this processing and all activities.

3. Understand all activities as well as challenges, problems and solution & various

roll which act in this business.

4. To know profile of ITC Ltd. and their business, product, award, reward,

business strategy, etc.

5. Improve our own general knowledge about this company & this business

concept.

6. To learn business skill this can help in future.

7. For submit & present to faculty teacher.

INTRODUCTION

Today in 21 century e-business & e-commerce initiative have become

popular but it may be rather difficult to think of poor illiterate farmer in a

centre position dusty villages of India making e-business a part of their daily

lives.

In Indian village may not have basic facilities such as electricity,

telephone, & transportation facilities? And in India have 75% proportion of

farmer & in that huge are illiterate & not aware of existence of computer, let

alone the internet & e-business. However large number of illiterate farmers

group conduct e-commerce transaction easily in the year of 2002 with the help

of innovative & revolutioning concept of e-Choupal which introducing by ITC

Ltd.

The purpose of e-Choupal implementing is net working the village via

internet & procuring agriculture product from farmer for export. ITC started

with just six e-Choupals in June 2000. ITC had managed to establish 1200 e-

Choupal centers in approximately 6500 village across 14 states within next five

to seven year.

ITC’s success rather than Tata chemical, Mahindra & Mahindra, Rallis &

EID had failed badly due to ITC’s long term vision for e-Choupal is grand &

company started with modest & focused value proportion that is farmer get’s

better price for crops, that why ITC’s gain creditability through early success &

learn from its mistakes.

BACKGROUND OF ITC’s

ITC was incorporated in August 1910 as the Imperial Tobacco Company

of India Ltd. by base company BAT.

Next sixty year’s only concentrated on growing & consolidating cigarate

business soon emerged as a leader in cigarate industry.

Company diversifies into other business & enters in to marine product

in 1971.

In 1974, the company’s name was change to I.T.C.Ltd.

The company entered the hotel business in 1975.

In textile business with Tribeni Handlooms in 1977 & paper business

with Bhadrachalam Paperboards in 1979.

In 1981 diversify into the cement business buying a 33% stake in India

cements from IDBI.

In 1980’s I.T.C. set up an information systems division named it I.T.C.

Infotech India ltd.

In 1986 entered the financial service business setting up a subsidiary

I.T.C. Classic Finance, consolidated with the ICICI in 1987.

In 1990 the company set up an International Business Division (IBD) for

exporting agricultural commodities.

In 1994 I.T.C. approached consultants McKinsey and co. to detailed

study of company business. As per advice concentrate on core business

& withdrawn from non-profitable business.

In 2000 entered in greeting card, gift, stationary & accessories, retail

store chains to sell clothes and accessories, foods and commodities, &

branded match boxes.

In 2001 company’s name was changed to ITC Ltd.

Award –

The ‘Far Easter Economics Review’ survey of Indian companies ranked

ITC as the eight among the top ten corporate in the country (2000).

About IBD-

IBD exporting agricultural product worth Rs.7.5 billion & thus, becoming

India’s second largest business. IDB’s main export were rice, soyabean, aqua

product, peanuts, wheat, coffee, black paper, sesame seeds & processed and

frozen fruit and vegetable. IBD was chosen as a leading supply chain partner by

organizations.

But company did not get desire profits due to several reasons –

Did not have sufficient control over the supply chain of the agriculture

produce.

Did not have direct control over the quality of product.

Lack of infrastructure for storage, handling & transportation of the

produce acted as major hurdle.

Middlemen & intermediaries.

FACTS AND OBEZERVATION

DETAILING THE E-CHOUPAL INITIATIVE

Traditionally, a farmer sold his agriculture produce to a small trader

referred to as a ‘Kaccha adat.’ The small trader called the ‘Pakka adat.’ Who

sold the produce in a ‘mandi’ (market place). Here, brokers interacted with this

large traders & helped theme sell their produce to corporate. This whole

procedure involved many intermediaries who resulted in procurement cost

being as high as Rs. - 700/- per tone of Soya.

Typical, farmer did not have enough resources to take his produce to

mandi. He had depend on like – weather report given by intermediaries.

Consequently, the farmer did not get a fair share of money.

Initially, ITC’s main objective was to reduce number of intermediaries

in the whole process. Primary task for ITC was to bring this information to the

farmer’s. The company decides to utilize IT tools to network the villages &

leverage the internet to provide information to the farmer & other people

involved. The basic idea was to equip village choupals with personal computer

(PC). And provide them internet connectivity.

In June 2000, the project was launched in villages of Madhya Pradesh.

Launch for Soya farmer website www.soyachoupal.com. ITC invest sum of 0.1

million to 0.3 million for each Choupal.

First, ITC opened three soya processing and collection center in that

created a role of ‘sanchalak’, an individual who would supervise and

coordinate the activities in e-Choupal. Company began looking out for farmer

from the villages around this collection center to head each Choupal. The

sanchalak had to be chosen very carefully because if he was big farmer, he

would show little interest in making the Choupal work & if the farmer was

small, the rest of farmers would not accept him as their leader. Therefore, a

sanchalak had to be a person of reasonable status in community. After

selection a sanchalak a PC was then install in his house & he was given training

on using it. This method worked out cheaper for company as it did not have to

invest in establishing internet kiosks at different places.

The sanchalak helped the farmer by guiding them in checking the

prevailing prices & other related information on the PC. The sanchalaks were

paid 0.5% of the procurement price for each ton soya product by ITC for their

Choupal. Before implementing any new initiatives, ITC consult its sanchalaks.

Besides, regular ‘Choupal’ meets were held. This not only provided the

company feedback from farmer, but also generated new ideas.

ITC also began to gather all information required by the farmer like the

daily mandi prices, weather reports, global prices, best farming practices and

other services like water, soil and PCR testing made available each choupals.

Current information like mandi prices, weather reports and global prices were

down loaded via the internet. Static information like best forming practices

was made available on compact discs (CD’s) or was installed in the PC’s hard

disk while setting up the choupals.

Next important step for the company was to deal with the commission

agent at the mandies. These commission agents had a strong influence on the

prices and where therefore consider being very powerful. But, implementation

of e-Choupal totally disrupted there business and most of these commission

agent were upset. ITC knew that for smooth functioning of its project, it could

not afford to totally ignore these agents. Therefore the company devised a

new roll for them and called them as ‘samyojkas’. Like – sanchalak, samyojkas.

Also underwent training and took an oath before being appointed to office.

The samyojak were also responsible for collecting the produce from

village that were located far away from the processing center and bringing it to

these centers. The samyojak was paid 1 percent commission for his service.

ITC’s reduce cost by 500 tones on procurement.

PROBLEMS AND CHALLENGES

Implementing & expanding the e-Choupal initiative was not an easy for

ITC. The company faced several problems like – intermediary unrest,

widespread illiteracy, outdated telephone exchanges and sporadic electricity

supply.

Out dated telephone facility – Where the connectivity was poor due to

the lack of proper telephone lines, ITC upgraded the telephone lines

using RNS kits (RAX network synchronization) and in some cases, by

using VSATs to by-pass the telephone lines completely.

Sporadic electricity – ITC made use of backup batteries, which could be

recharge with solar panels.

Government regulation – Produce Marketing Comities Act (APMC Act)

prohibited a company from purchasing certain specified commodities

from any source other than government design mandies. Theses item

included soyabean, coffee and wheat, all products ITC dealt with. ITC

persuade the state governments by telling political leader &

bureaucratize leaders about the benefits of the project to farmers and

other was involving it.

Illiterate farmer – ITC was able to train the first group of sanchalaks in

just two hours rather than the two days it had initially planned for. By-

showing video, farmer using the computer.

EXPANSION SPREE

After succeeded in the experiment with soyabean, ITC began to look for

new avenues to look for new avenues to expand its business. Soyabean was

just a small part of its entire agribusiness portfolio. Value chains differed from

one crop to another depending primarily on two factors; firstly on the

dynamics of the commodity the farmers traded in and secondly, the socio-

economic strata they belonged to.

In December 2000, the company launched a website, ‘Planters net’

(www.plantersnet.com), to deal with the coffee farmer in Karnataka. ITC set up

75 kiosks to cover 6000 coffee farmer in 125 villages.

In November 2001, ITC started its e-Choupal program

(www.echoupal.com.) in Utter Pradesh (UP). The company was attracted by

the size of the wheat market; in UP, the annual wheat production was 120

million tones- almost 14 times more than soyabean production in MP.

Approximately 180 kiosks were set up reaching more than 375000 wheat

farmers in over 1500 villages. The execution of program was similar to that for

soybeans in MP.

Ones e-Choupal initiatives generating good results, led to the decision

using the kiosks for ‘reveres trading,’ that allowing other companies to sell

their products directly to farmer via internet. In early 2002, ITC brought in

companies like Monsanto (a US giant dealing in seeds), BASF India Ltd. (an

Indian agrochemicals major), Nagarjuna fertilizers, (Indian fertilizer

manufacturer) and Madhya Pradesh State Seeds Corporation (MPSSC).

KEY LEARNING

Maintenance of local partners, the company’s commitment to

transparency, and the The e-Choupal model demonstrates that a large

corporation can play a major role in recognizing markets and increasing the

efficiency of an agricultural system, while doing so in ways that benefit farmers

and rural communities as well as shareholders.

The case also shows the key role of information technology, in this

case provided and maintained by a corporation, but used by local farmers, in

helping bring about transparency, increased access to information, and rural

transformation.

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 respect and fairness with

which both farmers and local partners are treated.