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ITC Agribusiness

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ITC Agribusiness

  1. 2. ITC's Agri-Business <ul><li>one of India's largest exporters of agricultural products. </li></ul><ul><li>ITC is one of the country's biggest foreign exchange earners (US $ 3.2 billion in the last decade. </li></ul><ul><li>The Company's 'e-Choupal' initiative is enabling Indian agriculture significantly enhance its competitiveness by empowering Indian farmers through the power of the Internet. </li></ul>
  2. 3. Problem in agri-business <ul><li>For ITC For Farmer </li></ul><ul><li>Inconsistent supply of raw a) lack of information </li></ul><ul><li>material. </li></ul><ul><li>Involvement of third party in b) less productivity </li></ul><ul><li>supply chain. </li></ul><ul><li>C) Delay in supply c) low price for their product </li></ul><ul><li>d) Bed quality of material </li></ul><ul><li>e) Getting raw material at high cost d) fails to supply on time </li></ul><ul><li>f) Less production. </li></ul><ul><li>g) less profit </li></ul>
  3. 4. To enhance rural incomes, there is a need for a system which can… <ul><li>… deliver an end-to-end solution </li></ul><ul><ul><li>who should be able to take an informed decision !! </li></ul></ul><ul><ul><li>with farmer having the freedom of choice ! </li></ul></ul><ul><li>… deliver effective service </li></ul><ul><ul><li>at low cost !!! </li></ul></ul><ul><li>And the opportunity lies in building capacity to induce productivity led growth by providing last mile connectivity </li></ul><ul><li>©1999-2005 ITC ltd </li></ul>
  4. 6. 3 Key Principles <ul><li>Empowerment </li></ul><ul><ul><li>Information and knowledge free of cost </li></ul></ul><ul><li>Choice </li></ul><ul><ul><li>Farmer choice to transact </li></ul></ul><ul><li>Business Model </li></ul><ul><ul><li>Fee to e-choupal Sanchalak for transactions through him </li></ul></ul>
  5. 7. Execution isn’t Easy! <ul><li>No telecom reach </li></ul><ul><ul><li>They use Satellite communications </li></ul></ul><ul><li>No Power; Erratic Voltage where it exists </li></ul><ul><ul><li>They use Solar Power </li></ul></ul><ul><li>First Time Computer Users </li></ul><ul><ul><li>Lot of effort on Capacity Building </li></ul></ul><ul><li>Resistance from traditional middlemen </li></ul><ul><ul><li>Farmers dealt with them! </li></ul></ul>
  6. 8. Production Channel Prior to e-Choupal Farmer Regulated Markets (15-75%) Trader Commission Agent Wholesaler (20-80%) Village Trader Ghani Producer Coop (3-5%) Cooperative Mill
  7. 9. 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-Choupa l ITC ITC Commission
  8. 10. Transaction Costs in Mandi Chain Soybeans Example Farmer Incurs Trolley Freight to Mandi = 120 Labour = 50 Kacchha Adat = 150 Handling Loss = 50 Rs per MT 370 Processor Incurs Commission to Agent = 100 Cost of Gunny Bags (net) = 75 Freight to Factory = 120 Handling at Mandi = 40 335 Total Chain 705
  9. 11. Transaction Costs in Choupal Chain Soybeans Example Farmer Incurs Trolley Freight to ITC Hub = 120 Labour = 50 Kacchha Adat = 150 Handling Loss = 50 Rs per MT 370 Processor Incurs Commission to Sanchalak = 100 Cost of Gunny Bags (net) = 75 Freight to Factory = 120 Storage & Handling at Hub = 40 335 Total Chain 705 120 50 Cash Disbursement Costs = 50 215 335
  10. 12. e Choupal benefits the farmer, by <ul><li>Enhancing farm productivity </li></ul><ul><ul><li>Through bundling customised knowledge with input deliveries </li></ul></ul><ul><li>Increasing farm gate price realisation </li></ul><ul><ul><li>Through bundling information with cropping & output marketing decisions </li></ul></ul><ul><ul><li>Through unbundling produce delivery, cash flow and pricing </li></ul></ul>
  11. 13. e Choupal benefits ITC, by <ul><li>Cutting down net cost of procurement, despite offering better prices to the farmers </li></ul><ul><ul><li>By eliminating non-value adding costs in the value chain </li></ul></ul><ul><li>Creating new business opportunities </li></ul><ul><ul><li>e.g. marketing several goods & services to the rural consumers </li></ul></ul><ul><ul><li>linking non-farm skill based services of rural origin with the global markets </li></ul></ul>
  12. 14. Thank you

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