itcs agri business
TRANSCRIPT
ITC's Agri-Businessone of India's largest exporters of agricultural products.
ITC is one of the country's biggest foreign exchange
earners (US $ 3.2 billion in the last decade.
The Company's 'e-Choupal' initiative is enabling Indian
agriculture significantly enhance its competitiveness by
empowering Indian farmers through the power of the
Internet.
Problem in agri-business For ITC For Farmera) Inconsistent supply of raw a) lack of information material.b) Involvement of third party in b) less productivity supply chain.C) Delay in supply c) low price for their product d) Bed quality of materiale) Getting raw material at high cost d) fails to supply on timef) Less production. g) less profit
To enhance rural incomes,there is a need for a system which can…
• …deliver an end-to-end solution
who should be able to take an informed decision !! with farmer having the freedom of choice !
• …deliver effective service
at low cost !!!
And the opportunity lies in building capacity to induce productivity led growth by providing last mile connectivity
©1999-2005 ITC ltd
3 Key Principles• Empowerment
– Information and knowledge free of cost
• Choice – Farmer choice to transact
• Business Model
– Fee to e-choupal Sanchalak for transactions through him
Execution isn’t Easy!• No telecom reach
– They use Satellite communications
• No Power; Erratic Voltage where it exists– They use Solar Power
• First Time Computer Users– Lot of effort on Capacity Building
• Resistance from traditional middlemen– Farmers dealt with them!
Production Channel Prior to e-Choupal
Farmer
Regulated Markets (15-75%)
TraderCommission Agent
Wholesaler (20-80%)
Village TraderGhani
Producer Coop (3-5%)
Cooperative Mill
The e-Choupal Business Model
Farmer
Regulated Markets (Fair Market Price)
Private Miller
Commission Agent (hired by ITC)
Village Trader
Ghani
Producer Coop (Negotiated Price)
Cooperative Mill
E-Choupal
ITC
ITC
C
om
mis
sio
n
Transaction Costs in Mandi ChainSoybeans Example
Farmer Incurs
Trolley Freight to Mandi = 120Labour = 50Kacchha Adat = 150Handling Loss = 50
Rs per MT
370
ProcessorIncurs
Commission to Agent = 100Cost of Gunny Bags (net) = 75Freight to Factory = 120Handling at Mandi = 40
335
Total Chain 705
Transaction Costs in Choupal ChainSoybeans Example
Farmer Incurs
Trolley Freight to ITC Hub = 120Labour = 50Kacchha Adat = 150Handling Loss = 50
Rs per MT
370
ProcessorIncurs
Commission to Sanchalak = 100Cost of Gunny Bags (net) = 75Freight to Factory = 120Storage & Handling at Hub = 40
335
Total Chain 705
120
50
Cash Disbursement Costs = 50
215
335
eChoupal benefits the farmer, by
• Enhancing farm productivity Through bundling customised knowledge with
input deliveries
• Increasing farm gate price realisationThrough bundling information with cropping &
output marketing decisionsThrough unbundling produce delivery, cash flow
and pricing
eChoupal benefits ITC, by
• Cutting down net cost of procurement, despite offering better prices to the farmers By eliminating non-value adding costs in the
value chain
• Creating new business opportunitiese.g. marketing several goods & services to the
rural consumerslinking non-farm skill based services of rural
origin with the global markets