eChoupal 6 th July2005 APT World Bank Leveraging Private Investment for Rural ICT Development Chiang Rai, Thailand ITC Limited Enduring Value. For the Nation. For the Shareholder.
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eChoupal
6th July2005
APT World Bank
Leveraging Private Investment for Rural ICT Development
Chiang Rai, Thailand
ITC Limited Enduring Value. For the Nation. For the Shareholder.
Large Population
Low Incomes
Rural is different
Rural is same
Excluded
Unviable Obligations
Illiteracy
Gaps in LegislationSustainability
Empowerment
Integrated Solutions Speed
Usage
Affordability
Market-led Development
Reduce Costs
Ability to Pay
Obligations
Government-led Development
Content
New TechnologiesCommunity Acceptance
Insufficient ResearchOBA
Reality Check : Wallet size in Rural areas is still small !!!
Some of the ideas we heard in the earlier sessions…
The Context
Indian Agriculture has Excellent Resources
Plenty of arable land Rich & Diverse Agro-climatic
Zones Strong Agricultural Research Large & growing markets
Indian Farmer’s Resourcefulness is also Legendary
Works very hard (whole family is on the farm)
Takes risk (on weather, yield, price) Is innovative (technology adoption)
Yet majority of the Indian Farmers are Poor
Because, most of them are small (1.5 ha average holding)
• They do not have bargaining power all of them live in hinterlands (600,000 villages)
• They do not have access to real time information
the circumstance of each one is very different (agro-ecological conditions, resources)• They cannot get customized knowledge advise
Further compounded by weak infrastructure Physical, Social, Institutional
To access markets, these farmers have to take the help of the Devil or swim through the Deep Sea
The Devil
The Middleman Lends money, sells inputs, buys output Spins an exploitative cycle of dependency
But, he is an indispensable link in the value chain because he makes up for lack of infrastructure,
and delivers critical value at low cost
Normally the devil is a devil, because he is able to block information flow & market
signals and extract larger profit for himself
The Deep Sea Unbundled Market Institutions Operating as silos, adversely impact the transaction
costs & quality of services Institutional Credit: Constrained by difficult
counterparty risk management Govt Agri Extension Worker: High Cost & Low Impact Agri Input Companies: Typically just product focus Multi purpose Cooperatives: Benefits cornered by a
few Market Yards (Mandis) :
• Ideal Price Discovery, but sunk cost of transport adds pressure on farmer to sell
• High transaction costs & malpractices
Farmer caught betweenthe Devil & the Deep Sea
Low riskTaking ability
LowIncomes
LowInvestment
LowProductivity
VICIOUS CYCLE
ITC eChoupal Premise
A Commitment Beyond the Market
It is possible to create and sustain business modelsthat can enmesh
shareholder value creationwith the goal of making substantial contribution to
society
Enhance Incomes
Farming BestPractices
IncreasedProductivity
IncreasedPrice Realisation
TransparencyTrust
eChoupal
Enhance IncomesCreate Surplus
Farming BestPractices
IncreasedProductivity
IncreasedPrice Realisation
AggregateDemand
Information onProducts/ Usage
Low Prices
Create Markets
ServeMarkets
eChoupal + Services
‘e’ makes it possible to build such a Model
Illustration ITC eChoupal Transactions
The eChoupal Price Discovery Farmer now Empowered Vs Being @ Receiving
EndValue through Unbundling what was bundled
together (Information & Transaction) earlier
The Input TransactionValue through Bundling (Information,
Knowledge, Transaction) what was available unbundled earlier
The eChoupal Infrastructure
ICT Kiosk with Internet Access In the house of one trained farmer, Sanchalak Within walking distance of target farmers
Warehousing Hub / Store Managed by the erstwhile middleman,
Samyojak Within tractorable distance of target farmers
Collaborative Network of Companies Orchestrated by ITC Within talking distance of target population
The eChoupal Services
Relevant & Real-time Information Commodity prices, Local Weather, News
Customised Knowledge Farm Management, Risk Management
Supply Chain for Farm Inputs Screened for Quality, Demand
Aggregation for Competitive Prices & Efficient Logistics
Direct Marketing Channel for Farm Produce Lower Transaction Costs, Higher Prices
because of Traceability
Bottomline for the Farmer
Higher Incomes throughIncreased YieldsImproved QualityReduced Transaction Costs
Power of Scale to the Small Farmer Customised Knowledge despite
Heterogeneity Real-time Information despite Distances
Current (6 States)
By 2010 (16 States)
The eChoupal Network
5050 Choupals, 33000 Villages
100,000 Villages
What’s in it for ITC?
Better supply chain for ITC’s Food & Agri Businesses Costs, Quality, Traceability
Access to the Underserved Rural Markets Through a Virtuous Cycle created by “Larger
Incomes”, and founded on “Trust” that is built
New ITES Business Opportunities Health, Education, Entertainment, eGovernance
Who Pays for the Services?
Not the farmer ! Information & Knowledge are free of cost Transactions only if the farmer chooses at
free will
Not subsidised ! ITC shareholder looks for a competitive
return, like all shareholders do No Government money involved
Instead, latent value in the typically unevolved markets of an emerging economy is captured
Multiple Value Capture Mechanisms
The Need: Market dynamics of different agri commodities vary,
requiring multiple business models Markets keep evolving, requiring models for
different stages of market evolution Sources of value become obsolescent with the
passage of time. There is a need to anticipate and plan for successive sources of value
The eChoupal Solution:1. Elimination of Non-Value Adding Activities2. Differentiated Products through Identity Preservation3. Value-added Products Traceable to Farm Practices4. eMarketplace & Support Services to Futures
Exchanges
In Other Words…
Empowerment of the Community through realtime information & customised knowledge
Community responsive grassroots organization through freedom of choice & local management
Efficiency through Competition
Power of Scale through Virtual Aggregation
Integrated Solutions through Collaboration and Multiple Partnerships
Continuous Innovation because of the Network Orchestrator
eChoupal Sagar
Thank You
ITC Limited
Additional Services being Pilotedthrough the new Delivery
Mechanism
Watershed Development
Livestock Quality Improvement
Integrated Health Services
Supplementary Education
IT enabled Services
New Delivery Mechanism Sanchalak in the Village + Farmer Empowerment
through unbundling information from transactions, through ‘e’ together with freedom of choice to transact, creates a Customer-responsive grassroots organisation Blends risk-taking and competitive approach of
entrepreneurs with the downward accountability benefits of a democratic producers’ organisation
Collaborating yet competing network of institutions orchestrated by a for-profit enterprise Provide the power of scale and world-class
specialisation, and Create innovative value capture mechanisms
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