Most people would agree that information technology has changed their lives—linked them to the global community, enabled them to share vital business data, and even provided entertainment and opportunity. For the rural poor, in countries such as India, this “connection of the times” to the world has been denied, and has been far out of their reach, until now.
Picture, though, an agricultural village where a farmer goes to a computer and does something as simple as check the weather. In the past, unreliable weather information might result in prematurely planted seeds being washed away by early rains. Other farmers exchange information about crops and agriculture, mutually investigating approaches that allow them to compete in the outside world, not just locally. Or the village of Khasrod, where 2,000 local students printed out their report cards, saving them days of waiting or a long trip. Children also now use computers for schoolwork and even games. Like youngsters everywhere, those in the villages use computers to investigate the latest movies, cell phone models, and sports news. Some even explore their aspirations for the future in a world now within reach. They are, for the first time ever, connected.
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This communication miracle—the empowerment of India’s agricultural poor—began simply enough as a company’s effort to reengineer the process of more efficiently and fairly getting the farmers’ soya crop to market.
This communication miracle—the empowerment of India’s agricultural poor—began simply enough as a company’s effort to reengineer the process of more efficiently and fairly getting the farmers’ soya crop to market. The ITC Group, one of India’s foremost private-sector companies, with a market capitalization of around $4 billion and annual revenues of $2 billion, had to initiate challenging social changes in addition to business changes to make this miracle happen.
The innovation—placing as many as 2,000 computer kiosks in rural agricultural villages as part of information centers (e-Choupals)—required ITC to address an existing traditional system governed by the Agricultural Products Marketing Act (1937), which had led to the establishment of a marketing channel through mandis, delivery points where farmers bring their produce for sale to traders and to be taxed. Inefficiencies, and corruption, had led to an outdated monopolistic system that unfairly restrained the farmers. ITC made a commitment in mission and resources to change the system in a way that would be fair to the farmers and yet profitable to ITC.
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ITC made a commitment in mission and resources to change the system in a way that would be fair to the farmers and yet profitable to ITC.
Traditional mandi trading was conducted by commission agents called adatiyas (brokers who buy and sell produce). They are of two types, as follows:
All the adatiyas belong to the Agarwal and Jain community, which manages grain trade across the entire country, an amazing fact considering the vast cultural and social diversity across the nation. It challenges the assertion that rural India is culturally unfathomable.
Three commercial channels exist for agricultural products: mandis, traders for eventual resale to crushers, and producer-run cooperative societies for crushing in cooperative mills. Traditionally, farmers keep a small amount for their personal consumption and have the produce processed in a small-scale job-shop crushing-plant called a ghani.
The lack of professional competition combined with the communal stranglehold on rural trading has made commission agents extremely wealthy. One commission agent, who belongs to a medium-size mandi, talked casually of assets and incomes in crores of rupees (millions of dollars). This counters the notion that there is no money in rural India. The adatiyas established the soya industry and grew it on the basis of familial and community trust, not professional norms. Buying and selling was based on oral agreements, mutual understanding, and community norms. Their network within this industry and their financial might have made them a formidable presence.
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The mandi system reflected the heavily regulated government intervention in days of production shortfalls, controlled land ownership, input pricing, and all aspects of product marketing.
The mandi system reflected the heavily regulated government intervention in days of production shortfalls, controlled land ownership, input pricing, and all aspects of product marketing. Produce could only be sold in government-recognized locations to authorized agents. Processing capacities, private storage, forward trading, and transport were restricted. The result was corrupt, ineffectual, and archaic systems.
Typical inefficiencies and sources of unfairness of the mandi system from the farmers’ perspectives include the following:
The farmer does not have the resources to analyze or exploit price trends.
When the mandi opens in the morning, farmers bring their trolleys to display areas within the mandi. Buyers inspect the produce by sight. There is no formal method of grading the produce, and the only instrument used is the moisture meter. Formal testing for oil content is not performed, and neither are global safety checks performed.
After potential buyers have inspected the produce, a mandi employee conducts the auction in which commission agents place bids. The farmers have a largely negative opinion of the auction for nonfinancial reasons. They feel a systematic loss of dignity in the auctioning process. The very fact that their lifework is auctioned off is seen as an insult. The final indignity is that the farmer cannot refuse the sale at the auctioned price. The agents belong to a close-knit community that is socially and economically distinct from the farming community. Although they might not collude in pricing, they do collude in establishing the practices of the trade. These practices uniformly exploit the farmer’s situation.
Mandi laborers bag and weigh the produce. A traditional compensation of these laborers is the sale of spilled produce. They therefore ensure that some portion of the produce is spilled in the weighing area, and then gather and sell this grain at the end of the day.
The exploitative tone of interaction also runs through the payment process. The farmer is never paid in full at one time. Payments are stretched over time. The farmer often travels many hours to get to a mandi. Repeating the trip costs him time and money. The farmer bears all the cost of bagging as well as any overnight-stay costs. The farmer is also at the agent’s mercy since the grain has already been delivered. Apart from the multiple trips to the agent’s office, the farmer gets no interest for the delayed payment and bears the cost of the time and travel. In addition, crushers pay agents usurious rates for the privilege of delayed payment.
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A unique set of tactical, strategic, and social imperatives drove ITC to conceive the e-Choupals and reengineer the entire value chain by deploying them.
When ITC entered this industry, produce was bought and crushed by small crushers who were also traders. The company soon realized it needed a greater presence in the chain to better understand product dynamics. ITC then began renting processing-plant time and buying soya from mandis. ITC’s procurement has grown rapidly since, and its initiative has seen the introduction of professional practices, transparency, and formal contractual relationships between agents and buyers. A unique set of tactical, strategic, and social imperatives drove ITC to conceive the e-Choupals and reengineer the entire value chain by deploying them. The mandi was clearly not an optimal procurement channel. Agent commissions would seem to be a source of inefficiency, but this sum is comparable to the salary paid to an employee for rendering similar services. The real sources of inefficiency were the price and quality distortions due to the agents’ stranglehold on the market and ITC’s distance from the farmer. Some examples of this are as follows:
Distance from farmer—. ITC had no direct interaction with the farmer. This gap created a range of supply-chain issues. ITC’s knowledge of its crops and suppliers (and therefore supply risks) was limited. ITC’s ability to improve the quality and quantity of its supply by bringing modern agricultural practices to the farmers was also limited.
Daily price inflation—. The agent purchased grain through the day on ITC’s behalf. Some produce of good quality would command a premium. Some of poor quality would sell at a discount. The agent purchased a range of qualities through the day at a range of prices. He mixed them at the end of the day and charged ITC a single price near the higher end of the spectrum.
Seasonal price inflation—. A corollary effect was that high-quality produce was used to make an entire lot of lower-quality produce acceptable. Agents therefore paid an inflated premium for high-quality produce. This drove up the high mandi price for the day. Very few farmers actually got this price, but this price acted as the benchmark for the next day’s pricing, thereby inflating the mandi price over a length of time. This created a distortion that inflated the overall seasonal procurement prices for ITC.
Capture of intra-day price shifts—. Mandi prices are fluid and vary within the day. ITC provided the agent a price range for the day to buy within. If the agent’s average buy price within the day was lower than the ITC price, the agent sold the grain to ITC at the ITC price and pocketed the difference. If the average buy price was higher than the ITC price, the agent would still buy the produce, but tell ITC that since its price was not high enough, no grain could be bought. He would store the grain and sell it to ITC the next day when ITC raised its price to make up for the previous day’s procurement shortfall. Commission agents therefore captured the entire benefit of intra-day price shifts.
The agent never lost. Officially, the agent’s commission is one percent of ITC’s price. In reality, ITC estimated the agent’s operating margin is around two and a half percent to three percent. The other insight is that the auction process is transparent in name only. The market is created, manipulated, and managed by the agents. The e-Choupal is an ideal vehicle to communicate directly with the farmer and thereby bypass the inefficiencies arising out of agent intermediation.
While the inefficiency in the supply channel was causing ITC to look inward, a changing landscape was forcing it to look outward. The agricultural commodity trading business was small compared to international players. By 1996, the opening up of the Indian market brought in international competition. These established and large companies had better margin-to-risk ratios because of wider options for risk management and arbitrage. To replicate their operating model would require a massive expansion of horizontal and vertical presence.
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The e-Choupal network was conceived to achieve “virtual vertical integration: by extending ITC’s engagement all the way to the farmer in the field.”
ITC devised a strategy to systematically deploy information technology to change the game. An existing horizontal integration deficiency was addressed through customer-relationship management-based solutions used to identify and provide for the nonstandard needs of customers in an industry where the basic services had been standardized. Customized information technology application and realignment of business goals and processes were deployed to manage risk and build the organization’s knowledge base. The e-Choupal network was conceived to achieve “virtual vertical integration: by extending ITC’s engagement all the way to the farmer in the field.”
The social agenda is an integral part of ITC’s philosophy. ITC is widely recognized as dedicated to the cause of nation building. Chairman Y. C. Deveshwar noted, “ITC believes its aspiration to create enduring value for the nation provides the force to sustain growing shareholder value.” This vibrant view of social conscience allowed ITC to recognize the unique opportunity of blending shareholder value creation with social development. The social impact of the e-Choupals as envisioned by ITC ranges from the short-term provision of Internet access to the long-term development of rural India as a competitive supplier (and buyer) of a range of goods and services to the global economy. The sustainability of the engagement comes from the commitment that neither the corporate nor social agendas will be subordinated in favor of the other.
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Implementing and managing e-Choupals is a significant departure from commodities trading practices in India.
Implementing and managing e-Choupals is a significant departure from commodities trading practices in India. Trading is not capital intensive since processing is outsourced and commodities are traded for margins that come through arbitrage of knowledge, time, or location. On the other hand, the e-Choupal model required significant capital outlays. Getting concurrence from the ITC board for such a venture as well as the diligent management of its progress required clarity of vision and an understanding of revenue streams and operations. Through its tobacco business, ITC has dealt for decades with Indian agriculture, from research to distribution. ITC’s translation of its strategic, tactical, and social imperatives into a business model demonstrates a deep understanding of both agrarian systems and modern management methods. Some of the guiding management principles included the following:
Reengineer rather than reconstruct—. The conventional view of transforming established business systems begins with the failure of the current system and means to change it. ITC looked at what was good with the current system and therefore what they could build on. ITC not only kept efficient providers from the existing system but also created roles for some inefficient providers from the previous system. This philosophy has two benefits. First, it avoids reinventing the wheel in areas where ITC would not be able to add value through its presence. Second, it co-opts members of the rural landscape, thereby making their expertise available to ITC while foreclosing the same from ITC’s competition. A good example of this in action is the role created for the commission agents (as discussed later in this chapter).
Address the whole, not just a part—. The farmer’s universe consists of many activities, ranging from procuring inputs to selling produce. Today, the village trader services the spectrum of the farmer’s needs. He is a centralized provider of cash, seeds, fertilizers, pesticides, and marketing. In doing so, the trader enjoys two competitive benefits. First, his intimate knowledge of the farmer and village dynamics allows him to accurately assess and manage risk. Second, he reduces overall transaction costs by aggregating services. The linked transactions reduce the farmer’s overall cost in the short term, but create a cycle of exploitive dependency in the long term. Rural development efforts thus far have focused only on individual pieces rather than entire needs. Cooperatives have tried to provide agricultural inputs, rural banks have tried to provide credit, and mandis have tried to create a better marketing channel. These efforts cannot compete against the trader’s bundled offer. Functioning as a viable procurement alternative, therefore, requires eventually addressing the gamut of needs, not just marketing.
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From the conception of the model, an information technology—driven solution was recognized as fundamental to optimizing effectiveness, scalability, and cost.
From the conception of the model, an information technology–driven solution was recognized as fundamental to optimizing effectiveness, scalability, and cost. Information technology is 20 percent of all the effort of the business model, but it is deemed the most crucial 20 percent. The two goals envisioned were as follows:
Delivery of real-time information independent of the transaction. In the mandi system, delivery, pricing, and sale happen synchronously, thus binding the farmer to an agent. The PC was seen as a medium of delivering ITC and other rates prior to the trip to the mandi, thus giving the farmer an empowered choice.
Facilitate collaboration between the many parties required to fulfill the spectrum of farmer needs. This goal follows from the need to address the whole, not just the part.
It is a tribute to ITC’s understanding of rural value systems that it did not hesitate to install expensive information technology infrastructure in places where most people might think twice. It is a tribute to rural value systems that not a single case of theft, misappropriation, or misuse has been reported from among the almost 2,000 e-Choupals.
Profitable reengineering requires the unambiguous understanding of value provided, the circumstances in which they are applicable, and the revenues they are capable of generating. Three sources of payback were expected:
Crop-specific intervention—. ITC recognized that agrarian systems vary by crop. This means the sources of inefficiency in the supply chain, the correction required from the e-Choupal, and the magnitude and timing of the resulting efficiencies will differ by crop. For example, the systems, and consequently the e-Choupal models and payback streams, for coffee and shrimp differ significantly from that of soya. ITC’s goals for the soya intervention reflected this nuanced analysis, and the project was targeted with recovering the entire cost of infrastructure from procurement savings. This is in contrast with the coffee and shrimp efforts, where the source of e-Choupal value is such that the investment recovery horizon is much longer.
Low-cost last mile—. The same system of physical and information exchange that brings produce from the village can be used to transfer goods to the villages. Since infrastructure has already been paid for by procurement, it is available at marginal cost for distribution. This ties in nicely with ITC’s larger goal of transforming the e-Choupal network into a distribution superhighway. ITC’s current channels reach areas with populations of 5,000 and more. The e-Choupals allow penetration into areas with populations less than this. Products such as herbicides, seeds, fertilizers, insurance policies, and soil testing services are, for instance, being sold through e-Choupal.
Intelligent first mile—. After the notion of consumerism and service has been established in the minds of the village farmers, their creativity and intimate knowledge of rural needs can be used to conceive the next product to be sold in villages. Thus, the farmers are transformed from being consumers to participants in the process of product design. This helps broaden the ITC offering and further bolster payback.
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ITC walked the government through the spirit of the Agricultural Produce Marketing Act as opposed to the letter and convinced them that e-Choupal procurement was in line with the goals of the act.
When the e-Choupals were conceived, they faced a fundamental regulatory obstacle. The Agricultural Produce Marketing Act (1937), under whose aegis mandis were established, prohibits procurements outside the mandi. ITC walked the government through the spirit of the Agricultural Produce Marketing Act as opposed to the letter and convinced them that e-Choupal procurement was in line with the goals of the act. Since ITC would not be using the mandi infrastructure for its procurement and they would have to incur their own costs on the e-Choupal infrastructure, the government offered to waive the mandi tax on the produce procured through the e-Choupal. ITC recognized the tax was a major source of revenue for the government and local mandis. Also, because ITC’s competition was also subject to it, the tax itself was not making ITC uncompetitive. ITC, therefore, chose to continue paying the tax rather than risk relationships with the government and the mandi.
The e-Choupal, which physically consists only of a computer with an Internet connection, is established in a village. A local farmer, called the sanchalak (coordinator), runs the village e-Choupal, which resides in the local sanchalak’s living room. In keeping with the philosophy of modular increments based on proven results, ITC experimented with a variety of village conditions before developing a checklist for attributes it looks for in the selected village. The goal that ITC is working toward is to saturate its operating areas so that a farmer has to travel no more than 5 kilometers to get to an e-Choupal. ITC expects each e-Choupal to serve about five to seven villages in this 5-kilometer radius. Today, e-Choupal services reach out to more than a million farmers in nearly 11,000 villages through 2,000 kiosks across four states (Madhya Pradesh, Karnataka, Andhra Pradesh, and Uttar Pradesh). Of the e-Choupals in Madhya Pradesh, the one in Khasrod services about 500 to 700 farmers in 10 villages, and another one in Dahod services 5,000 farmers in 10 villages. The average seems to be about 1,000 farmers per e-Choupal.
ITC manages the geographical and cultural breadth of its network by channeling communication through a local farmer called the sanchalak. Recruiting a farmer as sanchalak from the community served several purposes:
For generations, the Indian farmer has been betrayed by institutions, individuals, and even the weather. Trust is the most valuable commodity in rural India. No transaction will happen without trust, regardless of the strength of the contract. The sanchalak is selected to provide this vital ingredient to ITC’s message.
ITC did not have to invest in building and securing a physical infrastructure such as a kiosk for housing the computer.
The sanchalak is trained in computer operation and can act as a familiar and therefore approachable human interface for the often-illiterate farmers and other villagers.
ITC expects to leverage the power of the small-scale entrepreneur.
The sanchalak receives a commission for every transaction processed through the e-Choupal. Working as a sanchalak also boosts his social status, a very important aspect of rural Indian life.
ITC insists that at no time should the sanchalaks give up farming, because this would compromise the trust the sanchalak commands. The fact the sanchalak works on commission could undermine his credibility. ITC mitigates this by projecting the role as a public office as opposed to a profitable venture. This is one reason he holds a title (sanchalak). This image is reinforced by a public oath-taking ceremony, where in the presence of a gathering of the local villagers the sanchalak takes an oath to serve the farming community through the e-Choupal.
The sanchalak undergoes a training program at the nearest ITC plant. The training includes basic computer usage, functions within the e-Choupal Web site, basic business skills needed to function as a sanchalak, and quality inspection and pricing. For the sale of products through e-Choupal, the sanchalak receives product training directly from the manufacturer, with ITC involving itself only in product design and facilitation. In reality, the sanchalak gets most of his training on the job, which makes selecting sanchalaks with a natural drive all the more important.
“Virtual vertical integration” can work only if there is a continuous flow of information between the e-Choupals and ITC. Because of the numbers and geographic spread of the e-Choupals, this communication must be initiated by the sanchalaks. If their motivation to communicate with ITC diminishes, the channel will still function for procurement, but lack the vitality to manage supply risk, distribution, or product design. Maintaining continuous commercial flow keeps the sanchalak motivated to spend time and money in calling the ITC representative to ask about new products, convey village demand, and provide local updates. An example of the power of local information was seen early in e-Choupal implementation. A competitor tried to divert produce coming to the ITC factories by stationing motorcycle-riding representatives on the roads leading up to the plant. This person would stop farmers and offer them a premium over the ITC rate to divert their trolleys to the competitor’s plants. Information about this came to ITC from alert sanchalaks, and ITC was able to take necessary measures.
ITC maintains commercial volumes (and therefore commission checks) flowing through e-Choupals by intelligently sequencing procurement and sales year round. Purchases and sales have been arranged so that kharif (crop season coinciding with India’s monsoon, July–October) procurement, rabi (winter crop season in irrigated areas) inputs, rabi procurement, and kharif inputs sequentially maintain a steady stream of revenue for sanchalaks.
The previous day’s mandi closing price is used to determine the benchmark fair average quality price at the e-Choupal. The benchmark price is static for a given day. This information and the previous day’s mandi prices are communicated to the sanchalak through the e-Choupal portal. The farmer brings a sample of his produce to the e-Choupal. The sanchalak inspects the produce and based on his assessment of the quality makes appropriate deductions (if any) to the benchmark price and gives the farmer a conditional quote. The sanchalak performs the quality tests right in front of the farmer and has to rationalize any deductions to the farmer. The benchmark price represents the upper limit on the price a sanchalak can quote. These simple checks and balances ensure transparency in a process where quality testing and pricing happen at multiple levels. If the farmer chooses to sell his beans to ITC, the sanchalak gives him a note bearing his name, the village, particulars about the quality tests (foreign matter and moisture content), approximate quantity, and the conditional price. The farmer takes the note from the sanchalak and proceeds to the nearest ITC procurement hub, ITC’s point for collection of produce and distribution of inputs sold into rural areas.
The farmer bears the risk of transportation until the produce is delivered and the sale completed. The transportation costs he incurs are reimbursed by ITC. This reimbursement was initially based on the distance of the issuing e-Choupal from the processing center. This gave farmers the incentive to travel to a far away e-Choupal with their samples to get a higher transport reimbursement. ITC therefore did away with differential compensation and replaced it with a system of uniform compensation. Much of the procurement hub-related logistics are managed by the samyojak. Their responsibilities include the following:
Labor management at the hub
Bagging and baggage handling
Storage management
Transportation from the hub to processing factories
Payment processing and cash management
Handling mandi paperwork for the grain procured at the hub
For his services in the procurement process, the samyojak is paid a 0.5 percent commission.
Farmers’ gains from the e-Choupal approach include the following:
Better information—. Prior to the e-Choupal, the farmer’s information was incomplete or inaccurate. The only sources of information were the village grapevine and the commission agent. The e-Choupal gives farmers access to prices at several nearby outlets. Some e-Choupal sanchalaks have taken this a level further. They have begun accessing external pricing indicators such as prices on the Chicago Board of Trade Web site to track global trends and determine the optimum timing of their sale.
Better use of time—. An indicative price was available only when the farmer traveled to the mandi, incurring costs that he could ill afford. The final price of the transaction was available to the farmer only upon the completion of the auction, at which time there was no backing out of the transaction. At the e-Choupal, the farmer has access to price choice prior to his trip.
Both of these preceding factors work together to provide the farmer a better price for his crop.
Transportation cost—. The farmer bears the cost of transporting the crop to the mandi for a sale. ITC compensates its sellers for their transportation costs.
Transaction duration—. The mandi process can stretch into several days from arrival to full payment. Most farmers have traveled long distances to come to the mandi and incur costs of overnight stays or multiple trips. The sale to ITC takes no more than a few hours. (ITC targets two hours; farmers spoke of two to three hours. Our observation is that it probably takes two to three hours, possibly more in the peak season, but far less than a day.)
Both of these preceding factors result in a lower logistics costs for the farmer.
Weighing accuracy—. The mandis’ manual scales are inherently inaccurate, easily manipulated and subject to manual errors. ITC’s electronic scales are accurate and impartial.
Granularity of weighing—. The manual scales require that the produce be first transferred into bags. This intermediate bagging results in pilfering and loss of produce and the compounding of manual weighing errors over the entire load. The single weighing at ITC in which the entire wagon is weighed eliminates these losses.
Both of these preceding factors contribute to lower transaction loss.
Professionalism and dignity—. The ITC procurement center is a well-maintained, professionally run operation where the farmer is treated with respect and actually serviced as a customer. The farmers we spoke with evinced great emotion for the dignity accorded to them by a professional process. Farmers mentioned simple touches such as a shaded area with chairs to await their paperwork as indicators of ITC’s respect for them and their produce.
Even though intangible in the short term, the self-confidence created by the professional treatment is changing the way farmers conduct themselves. Sanchalaks, and even a commission agent, noted this change in farmer attitudes.
ITC’s gains from the e-Choupal approach include the following:
Disintermediation savings—. The commission paid to the agents were not excessive, but the true cost of intermediation, including the rent seeking, was between two and a half percent and three percent of procurement costs. A half percent commission to the sanchalak has replaced this.
Freight costs—. Direct reimbursement of transport costs to the farmer is estimated to be half of what ITC used to pay the commission agents for transport to their factory.
Quality control—. Removal of intermediary manipulation of quality and the ability to directly educate and reward quality in the customer base results in higher levels of quality in e-Choupal procurement. This results in higher post-processing yields.
Risk management—. The e-Choupal allows ITC to develop long-term supplier relationships with its farmers and attain some modicum of supply security over time. Risk is also managed in the e-Choupal world by a far stronger information infrastructure. Sanchalaks and samyojaks working on behalf of ITC provide excellent ground information on pricing, product quality, soil conditions, and expected yields. This information allows ITC to better plan future operations.
One of the most exciting aspects about the e-Choupal model is that it profitably provides an inaccessible village with a window to the world. The e-Choupal is the first and only PC in most of these villages. This fact, coupled with the higher remuneration and appreciation of the professional transaction, is causing several shifts in the social fabric.
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One of the most exciting aspects about the e-Choupal model is that it profitably provides an inaccessible village with a window to the world.
Overall, the change brought about by the e-Choupal is overwhelmingly positive. It is, however, important to note that some parties are adversely affected in the short term. Diversion of produce to e-Choupals has caused soya volumes to shrink by 50 percent at mandis. Most people who have lost are closely connected to the mandi, as follows:
Commission agents—. Despite ITC’s best efforts to maintain the mandi volumes and compensate the commission agents for lost income, there is little doubt that on the whole they have lower incomes after the e-Choupal than before.
Mandi laborers—. The workers in the mandi who weighed and bagged the produce have been severely impacted by the drop in volume. ITC’s long-term vision is to employ many of these people in the hubs in much the same functions as they perform in the mandi. The Sonkach mandi has 28 tulavatis (weighers) and 300 laborers.
Bazaars near the mandi—. When farmers sold produce in the mandi, they would also purchase a variety of commodities at the local bazaars. This revenue has now been diverted to shops near the ITC hubs, which is actually more a diversion of revenue than its elimination.
Some mandi operations—. ITC still pays the mandi tax for all the grain procured through e-Choupals, but it now pays the tax to the mandi nearest to the procurement center. As a result, tax is being diverted from several mandis to the few mandis near procurement hubs. The result of this is that regional mandis have lost taxes that contribute to maintaining their infrastructure.
Competing processors—. Even before the advent of the e-Choupal, the soya-crushing industry suffered from severe overcapacity; half of all capacity was excess. The efficiency pressures imposed by the e-Choupal have spurred industry consolidation.
There are other challenges to the e-Choupal system of which ITC is aware. The computer in the village is revolutionary, but there is also no doubt that the villages are socially stratified to the point where not everybody can walk up to the sanchalak and ask to be shown the computer. There are clearly income levels and the entire adult female population who do not have access to the computer. The innate power of the computer to drive social change will not be able to transcend this barrier unaided. This fact is by no means a reflection on ITC; it is a reflection on the nature of the underlying society in rural Madhya Pradesh. The solution might lie in observing where the system has driven social change. Village farmers belong to many social and economic strata. Yet, the sanchalaks are servicing all of them equally. In this case, the potential for commerce has broken a barrier that society has built. Similarly, engagement with the isolated demographics, especially women, might be possible through the active procurement and distribution through the e-Choupal of products tailored specifically to them.
ITC recognizes the limitations of today’s e-Choupals in their manifestation as vehicles of procurement efficiency. Not every crop lends itself to such an intervention. In crops such as soya, where value is to be had, followers will soon imitate ITC and eliminate the competitive advantage. ITC’s vision for the e-Choupals extends many generations as the e-Choupal evolves into a full-fledged orchestrator of a two-way exchange of goods and services between rural India and the world. At the very least, though, ITC has connected many rural villages to the rest of the world and taken real steps that while making a profit improve the condition and the situation of the rural poor.[1]