E-Choupal: Itc's Rural Networking Project

I. Abstract

In Hindi (an Indian language spoken in most parts of Northern and Central India), a

choupal is a village gathering place. The e-choupal initiative—whereby a choupal is

equipped with a computer and Internet connectivity—is the brainchild of a large

agricultural processing company in India, the Indian Tobacco Company (ITC). The

initiative was conceived to tackle the challenges posed by certain features of Indian

agriculture, such as fragmented farms, a weak infrastructure, and the involvement of

numerous intermediaries. Although the primary objective of the project was to bring

efficiency to ITC's procurement process, an important byproduct is the increased

empowerment of rural farmers where e-choupals have been established.

The e-choupal initiative directly links the rural farmers with the company for the

procurement of agriculture and aquaculture products, such as soybeans, coffee, and

prawns. Traditionally, these commodities were procured by such companies as ITC from

mandis (major agricultural marketing centers in rural areas of India), and a long chain of

intermediaries was involved in buying the produce from farmers and moving it to the

mandis. Through e-choupals, these farmers can directly negotiate the sale of their

produce with ITC. The PCs and Internet access at these centers enable the farmers to

obtain information on mandi prices and good farming practices, and to place orders for

agricultural inputs, such as seeds and fertilizers. This access to information helps farmers

in improving the quality of produce and obtaining better prices. Elected from the village

itself, a literate farmer acts as the interface between the illiterate farmers and the

computer.

The e-choupal model has been effective in the short term. However, because of multiple

variables that affect productivity, a long-term assessment of the system's productivity and

efficiency levels needs to be undertaken.

II. Background

The ITC group of companies has a yearly turnover of Rs 7.5 billion (US$162 million),

and its activities span tobacco and cigarettes, paper and packaging, paperboard, hotels

and tourism, information technology, and agricultural exports. For its agri-export

division, ITC procures various agricultural commodities such as soybeans, coffee, and oil

seeds. Typically, a farmer sells his produce to a small trader called a kaccha adat, who

sells the produce to a larger trader called the pakka adat, who in turn takes the produce to

a local mandi, where a larger trader buys the produce. The mandi traders then operate

through brokers to negotiate sales to companies such as ITC. This long supply chain

results in high procurement costs for ITC and in lost profit opportunities for the farmers.

Because this long supply chain is a very time-consuming system, it also results in

deterioration in the quality of the products.

* This case study was prepared by a team comprising Prof. Subhash Bhatnagar and Ankita Dewan at the Indian Institute

of Management (Ahmedabad) and Magüi Moreno Torres and Parameeta Kanungo at the World Bank (Washington

DC).

Empowerment Case Studies: e-Choupal: ITC's Rural Networking Project

2

The e-choupal system was introduced by ITC in June 2000. A choupal was converted

into an e-choupal by setting up a computer and Internet connectivity. An investment of

Rs