e Choupal is an initiative of ITC Limited (a large multi business conglomerate in India) to link directly with rural farmers for procurement of agricultural / aquaculture produce like soybeans, wheat, coffee, and prawns. e Choupal was conceived to tackle the challenges posed by the unique features of Indian agriculture, characterized by fragmented farms, weak infrastructure and the involvement of numerous intermediaries.
A powerful illustration of corporate strategy linking business purpose to larger societal purpose, e-Choupal leverages the Internet to empower small and marginal farmers – who constitute a majority of the 75% of the population below the poverty line.
Problems Before eChoupal was introduced:
Traditionally, these commodities were procured in “mandis” (major agricultural marketing centers in rural areas of India), where the middleman used to make most of the profit. These middlemen used unscientific and sometimes outright unfair means to judge the quality of the product to set the price. Difference in price for good quality and inferior quality was less, and hence there was no incentive for the farmers to invest and produce good quality output. With eChoupal, the farmers have a choice and the exploitative power of the middleman is neutralised.
ICT platform that facilitates flow of information and knowledge, and supports market transactions on line.
* It transmits Information (weather, prices, news),
* It transfers Knowledge (farm management, risk management)
* It facilitates sales of Farm Inputs (screened for quality) and
* It offers the choice of an alternative Output-marketing channel (convenience, lower transaction costs) to the farmer right at his doorstep
* It is an interlocking network of partnerships (ITC + Met Dept + Universities + Input COs + Sanyojaks, the erstwhile Commission Agents) bringing the best-inclass in information, knowledge and inputs.
e-Choupal is, thus, distributed transaction platform that brings together sellers, buyers along with information and service providers. e-choupal is a model with a number of non-conventional characteristics namely:
* customer centric
* capable of being used for many commodities and multiple transactions
* easily scalable once it is verified
* uses local talent and local people and develops local leaders
* can be extended to local as well as global procurers
* stimulates local entrepreneurs to extend their innovativeness
* uses all the existing institutions and legal frameworks and
* many others can join the market as transaction time is low.
Critical Success Factors
The e-Choupal experience highlights that ICT platforms can provide rural connectivity and e-commerce support. These platforms have enormous potential provided they are conceptualized for the specific needs of the community and business. Some of the elements that helped the e-Choupal to work successfully are discussed below:
Comprehensive knowledge of rural markets: Rural markets are both economic and social networks and there is a strong connection between the operation of social and economic transactions. Understanding the operations is vital before the systems are conceptualized. Use of local population, as much as possible helped the network to get the acceptance closely.
Designing a Win-Win transaction model: The success of e-Choupal comes from the condition in which both the farmer and the processor share the benefits coming out of the elimination of middle men and hence due to timely information availability.
Leveraging the logistics channels: The existing logistics of the rural markets are leveraged but they are not able to exploit the information asymmetry (unlike that in a conventional market). In that sense e-choupal uses the local institutions but eliminates the information asymmetry that they used previously.
Selection of Sanchalak: Both the selection of Sanchalak and the acceptance of Sanchalak by the community are very critical for the success of e-Choupal. ITC used a trial and error method for developing the procedure for selecting Sanchalaks. In the platform terminology Sanchalak is the interface for maintaining the platform. For the farmer the Sanchalak is the e-Choupal. Training and sensitizing him for the crucial role has been the main reason for the acceptance of the Sanchalak by the farmers. Sanchalak, thus, acts as the coordinator of the knowledge community, and a representative of farming community.
Evolving an appropriate user interface: The Technology interface used in rural areas has to be very simple. Interface has to be tried for rural settings and only after its validation it has to be used. Firstly, one has to understand the user pattern and secondly, it has to be tried, tested and validated. For example, farmers do not understand the concept of insurance. e-Choupal evolved a simple interfacing arrangement that a farmer can understand.
Bottom-up model for entrepreneurship: e-Choupal encourages enormous amount of creativity at the local level along with local entrepreneurship stimulation. The farmer and Sanchalak are free to use the e-choupal and develop new uses. e-Choupal unleashes the creative spirit in the rural India.
Today 4 million farmers use e-Choupal to advantage – bargaining as virtual buyers’ co-operatives, adopting best practices, matching up to food safety norms. Being linked to futures markets is helping small farmers to better manage risk. e-Choupal has been specially cited in the Government of India’s Economic Survey of 2006-07, for its transformational impact on rural lives.