eChoupals

A Study on the Financial Sustainability of

Village Internet Centers in Rural Madhya
Pradesh

ICTs and Sustainability

Author focuses on financial sustainability b/c without
financial sustainability project will not survive
Large funding agencies typically fund the incubation period

Indias largest commercial ICT project ITC - IBD

eChoupal
Ability to recover investment of ICT infrastructure through a
more efficient agricultural supply chain

Before eChoupal (Mandi)

Farmers in trolleys -> Mandi -> auction to Agents
Necessity of Mandi / Commision Agents
Lack of physical infrastructure (distances, small sized farmers)
Responsibility / risk of dealing with large number of farmers

Costs to farmer

Transportation Cost
Cost of weighing produce
Labor charges moving product from Mandi to warehouse
Price fluctuations based on quality of product -> traders mix product
& sell for profit
Paid in installments (few days to few months)

eChoupal
Set up agri supply chain that reaches farmers (like Mandi)
Set up to increase soybean quality, decrease procurement cost

Soybean Procurement
Farmers come directly to one of 9 warehouses
Spends less per ton of produce

No commission / transaction costs to middlemen

Crop tested for quality

Crop weighed on automatic scale (people dont calibrate the
instruments)

eChoupal Operational Model

Find an entrepreneur
Farmer w/ medium sized operation in a village to become agent of
change
To receive .05% of every rupee sold through Choupal (incentive)

ITC pays start-up costs

Computer & printer / solar panels / UPS with battery / optional
VSAT (internet)
No rent b/c using sanchalaks
Entrepreneur pays electricity / telephone / travel to office

eChaupal vs Mundi
eChaupal Advantages to Farmers
Provides futures price information to farmers
They can know when to come to sell crops

Bypass middlemen by selling directly to ITC

Reimbursement to farmers for transport costs
No payment to for bagging / weighing
Pay farmers full payment at time of transaction
Farmers save Rs 270 / ton

Only reaches middle-sized farms

Reduction of Transaction Costs

eChoupal Sustainability over 16 months

Primarily used for soybean procurement
Choupals: 461 in Year 1 -> 796 Year 2
133 K tons of soybean product purchased through
eChoupals
Saved Rs 25.8 million in transaction costs (2% of produce)
Rs 194 Rs / Ton savings
15.9 Million savings through improved quality (No Mixing)

Total Savings = Rs 41.7 Million

Total Investment = Rs 75.7 Million

eChoupal Financial Analysis

Extrapolation of 16 months of financial data to 7
years
Variables
20% to 50% failure rate of crop from lack of rainfall
6% to 15% - Lost opportunity cost (vs. investment in bonds,
etc.)
15% to 20% cash depreciation

Would recover its costs within 3.9 to 5.8 years

Payback Period

Not only sustainable, but eventually profitable

Future Stories?
Mobile Phones vs. Computers?
Information exchange between the farmer & the
eChoupal?
eChoupal used as distribution of other products /
services?
Reach into poorer and more remote parts of India?
Dissemination of agricultural best practices?