Soybean and its derivatives compose two-thirds of ITC's export business. ITC sourced soybeans from farmers for many years now and exports these soybeans to other Southeast Asian countries. However, the farmers encountered challenges, which made them lose 60-70% of their potential crop production. Because of this, soybean produce was lessened, and it affected ITC as well. Hence, ITC came up with the eChoupal Initiative to help farmers access information such as sowing seeds, herbicides, weather reports, etc.
David M. Upton and Virginia A. Fuller
Harvard Business Review (604016-PDF-ENG)
October 28, 2003
Case questions answered:
- What were the motivations of ITC for creating eChoupal? What are the physical/informational flows in the new and the old systems?
- What were the major obstacles in implementing this initiative? What are the problems and prospects (in the future) for ITC?
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Case answers for ITC eChoupal Initiative
Overview – ITC eChoupal Initiative
IBD, the agricultural commodities export division of ITC, pondered over how it could improvise the supply chain of their soya bean as a raw material. Hence, ITC came up with the eChoupal Initiative.
Soybean and its derivatives compose two-thirds of ITC’s export business. ITC sourced soybeans from farmers throughout rural Madhya Pradesh. The company had a 100-year relation with farmers, which gave them an integrated presence along the entire value chain. ITC exported soy meals to countries like China, Pakistan, Bangladesh, UAE, and Southeast Asia.
They sold soybean oil nationally and internationally. But the farmers didn’t have access to quality inputs and information such as sowing seeds, herbicides, weather reports, etc. Some gatherings in the evenings and having a simple assembly called ‘Choupal’ were the only means of sharing knowledge. Due to this, farmers were losing 60-70% of their potential crop production.
The IBD agricultural commodities export division of ITC was lagging behind other divisions. This is because the farm yield is only one-third of the global standards, which resulted in reducing profit margins for both ITC and the farmers.
Thus, the concept of eChoupal came to the picture, which made it more accessible and convenient for farmers to get information that would help them increase their efficiencies and hence profit margins. An eChoupal is a kiosk with a desktop computer and internet access. It takes around 3 Lakhs to set up and a meager 10,000 rupees annually to maintain.
The ITC eChoupal services reach around 40 lakh farmers and consist of 6450 kiosks across eight states. This further helped ITC by gaining farmers trust and increasing the quality of the products they received.
The following factors motivated ITC to establish eChoupal.
- Lack of knowledge of modern agricultural technologies and techniques
- Low quality of seeds and fertilizers used.
- Over-dependence on Monsoon
- Limited capacity of risk for farmers
- Price offered weren’t known before-hand, and if crops not sold, warehouse facility wasn’t available.
- Exploitation of farmers using corrupt practices like faulty weight system
- No Incentives for good quality crop
- Delay in the payment of farmers after the selling process
- Dynamic price changes even changes some times a day.
- Corrupt practice by CA while acting as a middleman between ITC and farmers
- No bargaining power for farmers
- Constantly decreasing profits
- Growing risk aversion of farmers making them reluctant to experiment with new farming methods
These factors helped ITC to add value-adding steps in the supply chain and remove the non-value, adding aspects to benefit both the farmers and ITC mutually.
The information provided by the website www.soyacchoupal under the ITC eChoupal Initiative were: