e-Choupal | ArticlesBase.com | Digital Trend Blog

e-Choupal | ArticlesBase.com

August 05, 2009 By: admin Category: Computers and Technology

Introduction

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, etc. The company has initiated an e-Choupal effort that places computers with Internet access in rural farming villages; the e-Choupals serve as both a social gathering place for exchange of information (choupal means gathering place in Hindi) and an e-commerce hub.

e-Choupal is a Hindi word which means village meeting place. Market is a meeting place where vendors and customers come together to do transactions. e-Choupal is a virtual market place where farmers can transact directly with a processor and can realize better price for their produce. e-Choupal has the advantages of the market but spans very large varieties of vendors and customers. Geographical distances do not restrict participation in the e-Choupal. The main disadvantage of conventional market is that information asymmetry is inherent in the market where as e-Choupal provides for transparent transactions. This enables the participation of smaller as well as larger players. Elimination of some layers of intermediaries allows for larger share of profits to reach the lower end of value chain. The main attractiveness of e-Choupal is that it can be used for connecting large producers/small producers and small users/large users, thereby eliminating the need for hierarchy of brokers. Internet is used as a low transaction cost backbone for communication. Physical delivery of produce to the processor is still done through the existing intermediaries. e-Choupal does not attempt total elimination of intermediaries, as intermediaries are indispensable in economy like India where intermediaries are adding value to the every step of value chain at a low cost. Intermediaries have the expertise in storage, transportation, quality assessment and counter party risk reduction, which are difficult to replicate. e-Choupal provides farmers with all the market information and this helps them to become market oriented. In e-Choupal intermediaries are leveraged but they are disintermediated from the market information flowing to the farmers.

Unique Business Model: e-Choupal

The e-Choupal model has been specifically designed to tackle the challenges posed by the unique features of Indian agriculture, characterized by fragmented farms, weak infrastructure and the involvement of numerous intermediaries, who block critical market information from passing to the farmers and use that information for getting a big margin for themselves. The intermediaries capitalized on the economies of information and economies of physical things, which are tied together in a bundle. Due to this, the farmer does not get the proper price of its product & they continue to live below the poverty line. But e-Choupal sets things in order as it smoothens the flow of information to the farmers by disinter mediating intermediaries from the chain of information flow and at the same time leverages the physical transmission capabilities of the them as they deliver critical value at every link for a very low cost in a weak infrastructure environment. The structure of e-Choupal is shown in figure.

The project e-Choupal is ITCs unique click & mortar initiative e-Choupal is an ICT (Information and communications Technologies) platform for carrying out trade at a number of locations. In this, ITC sets up a back-up physical service support at the village level, called Choupal, through Sanchalak: a lead farmer, who acts as the interface between computer and the farmer. ITC accumulates information regarding weather, modern farming practices, and market prices from sources like Meteorological Department, Agri-universities, mandis (regional market) etc., and upload all information on to e-Choupal web site. All information is customized according to local farmers requirements and provided into the local language through computer set up by ITC in Sanchalaks house. Sanchalak access this information and facilitates its dissemination to farmers. Information regarding weather and scientific farming helps farmers to select the right crop and improve the productivity of their farms. Availability of market information helps farmers to become market oriented. They know what price ITC is quoting and the price prevalent in the local market, thereby helping better price realization for farmers. If farmer decides to sell to ITC, Sanchalak works as the aggregator of small farmers produce to sell them to ITC. Sanchalak also aggregates farmers input purchase orders for various items like seeds, pesticides and places them directly with the suppliers through internet and facilitate supply of high quality farm inputs as well as purchase of farm produce at farmers doorstep with the help of intermediaries as shown in figure previously. It can be deciphered that e-Choupal has added critical value to the existing supply chain through innovative application of information technology. ITC-IBD has successfully reached the vastly scattered farming villages of India and facilitated the smooth flow of rich information to them by disintermediating the intermediaries in flow of information. Power of information is working as the catalyst of transformation of the life of farmers by helping them to get improved yields from their farms and better price realization. Usually it is tough to maintain the expanding scale of reach and richness into the products or services but e-Choupal is achieving it easily and we find that overall value chain has been shifted horizontally on the scale of reach and richness. e-Choupal is an 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.

About the Author:

R.Yuvarani M.Phil Scholar Department of Commerce Periyar University, Salem-11

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