ITC E- Choupal

Xavier Institute of Management,

Bhubaneswar

Case Background

Rural markets are complex and challenging

Business practices are under- developed

Infrastructure constraints are many

Market access for the producer is an issue

ITC Innovation

E- choupals ( information centers) connected

to the internet

Linking farmers to firms and markets

Supply chain integration

Indian Agriculture A
Paradox

Economically vital but archaically regulated

High levels of production with low productivity

High levels of information asymmetry

ITC Intervention in Soya

Bean

Oil seed complex

Groundnut & Mustard( traditional)

Sunflower & Soya( non- traditional)

Shortage in the 1970s and 80s

Continued

Policy measures to increase production

Soya & Sunflower boosted production

ITC Intervention in Soya beans

Traditional Soybean
Marketing

90 % of the produce marketed through

traders & government regulated markets

Mandis, traders & producer co-operative

societies

Modalities & Norms

Mandi

Central to agricultural marketing

APMC act

Soyabean mandi services around 700 sq

kilometers

Commission Agents

Kuccha and Pucca Adatiyas

The Agrawaal & Jain community

Formidable presence and stranglehold over

the business ( Norms)

Mandi
Operations( Modalities)

Inbound logistics
Display and inspection
Auction
Bagging and weighing
Payment
Outbound logistics

Inefficiencies ( Process
Improvements)
Inbound
logistics

Cost

to farmers
Information asymmetry

Display and
inspection

Crop

Auction

Bagging &
Weighing

Payment

Irregular payments

Outbound

Delays

exposed to the elements

Inspection unscientific & arbitrary
No incentive for quality
Loss of dignity

Farmer bears the cost

Wastage by Tulawatis

Other Inefficiencies

Limited storage

Unreliable information services and platforms

Potential of forward contracts unrealized

ITC Analysis of Soya Trade

Price and quality distortions

Distance from farmer

Daily price inflation

Intra day price changes

Creation of ITC e- Choupal

Virtual vertical integration

A social imperative

e- Choupal Strategy

Reengineering Vs Reconstructing

Addressing the whole

An IT driven solution

IT Driven Solution

Delivery of real time information

Facilitating collaboration

Crop specific intervention

Low cost last mile

Intelligent first mile

E- Choupal Operation

Sanchalak & Samyojak

1000 farmers per Choupal

Trust the foundation of the business

Grass-root level leadership

Trust: Sanchalak Selection

Living from farming

Median wealth

Progressive

Ambitious

Literate

Transaction in ITC Platform

Pricing

Inbound logistics

Inspection & gradation

Weighing & Payment

Hub logistics

Transaction: Efficiencies
Pricing

Static

average quality price

In situ quality control and price offer
VSAT connectivity

Inbound

Inspection &
grading

Weighing
and
Payment

30-40 Kms from farmers

Warehouses or ITC factories
Methods the farmer can understand
No lab tests
Electronic
Full payment and reimbursement of freight

Gains to Farmer

Better information content

Better timing of information

Reduced transportation cost

Shortened transaction time

Increased weighing accuracy

Gains for ITC

Risk management

Reduction in freight cost

Control on quality

Procurement savings

Harnessing the Power of the

Network

Procurement

Rural Distribution- 100 partnering

companies

Financial Services

Rural retail

Concluding Thoughts- Vallabh &

Sridhar

Manpower driven TO Technology driven

Disintegrated TO Integrated supply chain

From Finance TO information as a source of

control

Negative Effects

Loss of business for bazaars adjacent to

Mandis

Loss of revenues to Mandi

Crushing units loose business

Kiosk Business Planning

Number of Services

Total revenues

Break up of revenues

Number of customers

Categorisation of customers

Average revenues per customer

Types of Services

Customised services

Free services

Offline services

Recurring services

Value and Demand of Services

Low Demand and High Value

High Demand and Value

Low Demand and Value

High Demand and Low Value

Customer Profiling

Regular low value customer

High Value regular customer

Low/ no value irregular

customer

High Value irregular customer

Infrastructure/ Cost Considerations

Low cost reliable infrastructure

High cost reliable

infrastructure

Unreliable low cost

infrastructure

High cost unreliable

infrastructure

Technology and Applications

Cost of technology

Competing Technologies

Scalability & robustness

Level of customization
Number of applications
Adaptability

Efficiency of servicing
(promptness)
Cost of Servicing

Partner Organisations

Risk sharers

Revenue sharers

Infrastructure Sharers

Promoters

Overall Considerations

Communication
channels

Documentation
methods

Learning curve

Time table of
withdrawal of
subsidies/grants

Objectively verifiable
parameters

Indicators and
early
warning systems

Projections

Cost

Revenue

Close of Sessions

Thank You