As I outlined in a post last year the Indian agricultural market is tough. Farm ownership tends to be heavily fragmented, the infrastructure is often poor and historically the supply chain has been clogged by middlemen. This makes life difficult for both farmers and the buyers. For example, often farmers would have to travel for days to a market with no knowledge of current prices, once there the exploitative middlemen could pay below the market rate and refuse to pay any premium for quality. It has been estimated that farmers were losing up to 60% of the value of their crop as a result. This in turn disincentivised the farmers from improving their crop quality and made supply to the industry’s big buyers unpredictable. Large food buyers, such as ITC Limited (an Indian conglomerate), would surely have to accept this status-quo?
机 jī opportunity
No, to the contrary ITC has harnessed technology to overcome these structural problems by investing in internet kiosks in rural villages. The kiosks, named eChoupals, enable the farmers to sell direct to ITC at an agreed price, give access to best practices and enable them to place orders for agricultural inputs such as seeds and fertilizers. In order to instill trust in the system ITC trains a local farmer to run the system and places it in their house – on average each serves 600 farmers in the surrounding ten villages. To ensure that they remain incentivised the sanchalaks receive a small service fee. Even after this service fee it is estimated that farmers’ profits have increased by more than a third and ITCs costs have reduced. The conglomerate plans to scale up to 20,000 eChoupals by 2012 (from 6,500 today) potentially servicing 15 million farmers.
- Harnessing technology to disintermediate inefficient value chains?
- Empowering local talent to assist in supporting your customers?