ITC’s e-chaupal initiative

This was launched in 2000 by the International Business Division (IBD) of ITC. Currently it reaches out to more than 3.5 million farmers in over 31,000 villages through 5200 kiosks.

ITC entered the soy industry in the 1990’s. It soon realized the need for greater presence to understand the product dynamics in better way.

Production channels prior to E-chaupal

The Agricultural Products Marketing Act legislated the creation of mandis wherein the producers would bring in their crops for sale to the traders. Mandi trading is conducted by commission agents called adatiyas (who buy and sell produce). They belong to the Agarwal and Jain community. They for a close knit economic community.

Farmers bring their produce o the mandi in carts and more often than not, they arrive to the mandi in the night to avoid queue. When the mandi opens in the morning they bring their cart to the open area to display their produce.

The produce is inspected by sight. No test is conducted to check for oil content. No grading of the produce and the only instrument used is the moisture content meter.

Once the potential buyers have inspected the produce, auction is conducted by a mandi employee where commission agents place the bids. It is oral auction and the result of the six month of the farmer’s hard work is decided in just 30 seconds. For the commission agent, this is a routine job, there are loads of cart waiting to be auctioned.

The produce is then taken to the weighing area, either in the mandi complex itself or in the commission agent’s home nearby. In the latter case, the produce is packed in sacks and then weighed manually at the commission agent’s place. The farmer goes to the agent’s office to collect the cash. The agent pays the mandi fee to the mandi. The produce is then loaded on the buyer’s vehicle and then goes to the processing plant.

Limitations of the mandi system

1. Farmers have no idea of the price trend, hence no idea of optimal selling time.
2. Auctioning mechanism is not the best mechanism of the actual price discovery. Moreover, by the time the price is discovered thru auctioning, it’s too late for the farmer to go to the other mandi to sell his produce.
3. Farmers have to wait overnight for the mandi to open next day, adding to the overall cost.
4. Most crops are displayed in the open, hence negatively impacted by the weather conditions. the quality check are very crude. No incentive to the farmers to improve he product quality.
5. Farmers have to bear the cost of bagging and weighing, done by mandi laborers—part of whose compensation is the spilled produce. Hence they have no incentive to reduce the wastage thru spillage.
6. Under-weighing of the produce thru the use of faulty weighing machines.
7. Farmer is not paid upfront for his sale. He has to come to commission agent’s office several times to collect his money.

ITC’s initiatives



The Agricultural Produce Marketing Act prohibits procurement outside the mandi. ITC convinced the government that its model of business would within the spirit of the Act.

Under the business model, the company appoints a Sanchalak to manage one e-chaupal. The sanchalak is generally a person from the same village community who can read and write, has the risk taking ability, and lot of zeal with entrepreneurial spirit. He gets training from the nearest ITC centre on basic computer literacy, using e-chaupal portal and a few basic business funda.

One e chaupal is meant to serve around ten villages in a five km radius.

Another secondary but important role is played by samyojak, who provides logistic support.

E-chaupal supply chain

Pricing


The previous day mandi price is used to determine the benchmark fair price at the e-chaupal. The commission agents at the mandi feed this data into the e-chaupal portal which is then communicated to the sanchalak via portal.

Inspection and grading


To initiate a sale, a farmer brings his produce to the sanchalak who then conducts a quality check and makes appropriate deductions (if any) from the benchmark price and gives a conditional price to the farmer. If the farmer accepts the quote and wants to sell his produce to ITC, then the sanchalak gives him a note capturing his name, village name, quantity and quality of the produce, and the conditional price offered.

Weighing and payment

The farmer takes his produce along with the note from the sanchalak to the nearest ITC’s procurement hub where the produce is again tested in the laboratory against the sanchalak’s assessment. The produce is weighed on a electronic machine, first with the produce and then without it.

Hub logistics

The farmer is paid for his produce at the cash counter immediately and he is also reimbursed his transportation cost. All stages of procurement is duly documented and he is given all the receipts.