EMPOWERING THE SMALLEST

Indian farmers typically buy at retail prices and sell their produce at wholesale prices, losing out on both ends of the deal. By virtually aggregating them, e-choupal brings the power of scale to the smallest of farmers. ITC ensures that there are at least two suppliers of all products sold through the e-choupal. Farmers can pool their demand, compare prices and place orders on the Net. Bargain and choice-two key virtues of competition-are delivered to the farmers right on their doorstep.

FARMER FEEDBACK

KHUSHI RAM Karai Purva, UTTAR PRADESH Till 2003, he had no say in deter-mining the price of his wheat at the local market. This year, Ram sold his crop through e-choupal. "The corn productivity of my farm this year almost doubled from 5-6 quintals per acre to nearly 12 quintals an acre."

When it is time to sell the produce, e-choupal helps the farmers by breaking the monopoly of local markets that are controlled by trade cartels. In most mandis, farmers are cheated at several stages-arbitrary pricing, underweighing, delayed payments. In Uttar Pradesh, farmers lose between 10 and 30 per cent of their income to such malpractices. ITC is setting up its own purchase centres in the six states covered by e-choupals. The farmers' response has been overwhelming. In 2001-2, the company purchased 60,000 metric tonnes of crop through e-choupal. By 2003-4 the purchase increased to 2,10,000 tonnes and in four months of 2004-5, the company picked up 1,80,000 tonnes of farm produce.

For farmers it is a win-win situation. Sitting in their village, they can check the prevailing purchase price at the mandi and the ITC centre through e-choupal and sell wherever they wish to. ITC's entry into crop purchase invariably means a rise in mandi rates too, benefiting even those farmers who can't sell to ITC. In places where ITC rates aren't higher than the mandi rates, farmers are drawn to ITC centres because the company uses electronic weighing, better quality testing and ensures spot payment. "Farmers in my area have stopped going to mandis," says Virendra Pratap Singh, sanchalak of Malau e-choupal, off the Kanpur-Lucknow highway in Uttar Pradesh.

FARMER FEEDBACK

UMA KANT SHUKLA Malau, UTTAR PRADESH Never used branded seeds as they were fake and costly. Assured of quality seeds, he bought them from e-choupal, with delightful results. "The corn productivity of my farm this year almost doubled from 5-6 quintals per acre to nearly 12 quintals an acre."

The farmers can't stop counting the benefits. Uma Kant Shukla has been growing corn for years. But his five-acre field in Malau had never produced more than six quintals of crop per acre. Last year Shukla reaped up to 12 quintals of corn per acre. Reason: for the first time in his 20 years of farming, he used high-yielding, branded seeds bought through e-choupal. Akhilesh of Karai Purva had a bigger windfall in 2004. His wheat crop nearly doubled and the income from sale almost tripled. "It was a result of better seeds, better herbicides and better sales prices-all achieved in a single year," says Akhilesh.

About 1,000 km away in the village of Tallarevu in Kakinada, Andhra Pradesh, G.V. Ramana, a 30-year-old shrimp farmer logs on to the Internet to check the prices of shrimp in the local market. That helps Ramana decide which is the best time to sell. Rajesh, a soya bean farmer in Badi Mungawali village near Bhopal in Madhya Pradesh, goes a step further. He also checks the price movements of soya bean on the Chicago Board of Trade from his village and in his local language. That gives him and other cultivators an idea of the future prices of soya bean in the local market. Helped by e-choupal, Shukla, Akhilesh, Ramana and Rajesh are transitting from the world of low-knowledge, low-productivity, low-income farming to one of information-based, high-productivity, high-income agriculture.

FROM IMPERIAL TOBACCO TO INTERIOR KING

OTHER BENEFICIARIES

VIRENDRA P. SINGH Malau, UTTAR PRADESH A farmer,Virendrabecamee-choupal sanchalak in 2003. The change he saw in farmers' outlook in the past two years he hadn't seen in a lifetime. "It is a win-win situation for all the parties. Initiatives like the e-choupal will revive the farmers' interest in agriculture."

ITC is setting up six e-choupals a day at the cost of about Rs 3 lakh per installation (Rs 2 lakh for hardware and Rs 1 lakh for pre-installation preparation). Since each e-choupal covers between five and six villages, the company is entering 30-36 new villages a day. About Rs 125 crore has so far been invested in e-choupal and the company is committed to spending Rs 1,000 crore on the initiative. It has also begun a chain of giant rural malls, with the first one already operational in Sehore on Indore-Bhopal highway.

So why is the 76-year-old ITC (once called the Imperial Tobacco Company and even now is one-third owned by British tobacco giant bat) betting so big on rural India? Just eight years ago the company was under pressure to quit agri-business and forced to sell its edible oil brand Sundrop. The answer lay in a combination of coincidence, compulsion and courage. Though ITC still gets 80 per cent of its sales and earns 70 per cent of its profits from tobacco, that is set to change. Beginning 2000 the company has become aggressive on agri-business and has launched and acquired over a dozen products and brands.

The company's fast-expanding food division-with brands like KITChens of India, Aashirvaad, Sunfeast, Candyman and Mint-o-is one of e-choupal's big customers. Sourcing inputs directly from farmers (instead of agents) gives it a competitive edge over its rivals in quality and cost. E-choupal is also beginning to dictate the company's product portfolio. For instance, ITC launched the Aashirvaad brand atta because it wanted to enter Uttar Pradesh to buy wheat. Aashirvaad has become one of India's largest selling atta brands and the company is able to build a link right from farm to fork. Similarly, the company owns Wills Sport and other garment brands. It plans to enter cotton procurement which will help it forge linkages between fibre and fashion.

OTHER BENEFICIARIES

G.S.V. SUBBARAJU Shanthimual, ANDHRA PRADESH Owner of a 20-acre shrimp farm in Kakinada, Subbaraju is a pratinidhi. Aqua-choupal has vastly improved prawn breeding in the area. "Aqua-choupal has revolutionized shrimp farming here. Farmers now know the correct time and price to sell prawns in the village itself."

There is almost an endless scope for making money out of the e-choupal network which is expanding at a blistering speed. As a commercially viable way to reach 600 million villagers, it is emerging as a honey pot for companies whose distribution networks rarely reach small villages. As the owner of this unique road into rural India, ITC will charge a fee from every user company. Already ITC gets a commission from 37 companies that sell their products through the e-choupal. These products range from tractors to soaps to hair oil. "We sell our products through the e-choupal. In the long term I think it will be a success," says Adi Godrej, chairman, the Godrej Group. By 2010 the turnover of the e-choupals is likely to log as much as the current turnover of ITC's tobacco division: over Rs 9,000 crore.

Not to be underestimated is the positive spin-off of doing business while simultaneously doing social good-so critical for a company in the business of tobacco which is globally under fire as a dirty business. ITC is now propounding a concept of "triple bottom line": measuring a company's performance on the use of economic capital, environment capital and social capital. But even though it is way ahead of others in the speed and spread of its e-choupal, the company needs to watch out for the big and the mighty of the corporate world that are rolling out their rural ventures, some of which have longer experience in agri-business than ITC has (see "New Deal for Rural India"). E-choupal's speed and spread have also created resentment among mandi functionaries in Madhya Pradesh who perceive ITC's participation as interference on their turf.

Index