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In some states, we still need a licence to operate: S Sivakumar

Interview with Divisional Chief Executive, Agri Business, ITC

Arindam Majumder & Ishita Ayan Dutt  |  Kolkata 

In some states, we still need a licence to operate: S Sivakumar

The e-Choupal that sought to leverage the internet to connect farmers directly with buyers was ITC's showcase project. However, with restrictions under the APMC Act and frequent invocation of the Essential Commodities Act, the consumer goods major has had to tweak the original concept. S Sivakumar, divisional chief executive, Agri Business, and member of ITC's corporate management committee talks to Arindam Majumder & Ishita Ayan Dutt on how the scope of the model has expanded. Edited excerpts:

How many e-Choupals and Choupal Saagars are there?

There are 6,500 e-Choupals and 24 Choupal Saagars. In Take-2 of the e-Choupal initiative, where a lot of action is through mobile devices, supplemented by on-farm demonstrations of crop management practices, these numbers convey only a part of the story. Through one method or the other, ITC's agri businesses reach 69,000 villages, in 220 districts.

How have regulatory hurdles impeded the growth of e-Choupal?

Restrictions under the Agriculture Produce Market Committee Act have prohibited direct engagement with farmers outside the four walls of mandis in several states and commodities. Prohibition of Options under the Forward Contracts (Regulation) Act have restricted the scale of operations, as there is no institutional mechanisms to manage price risks. Frequent invocation of the Essential Commodities Act contains the volumes transacted, leading to delayed pay-back of infrastructure investments.

Some states have got down to amending the APMC Act over the past couple of years. Has it helped?

Unless the reform is done totally along the lines of the model APMC law recommended by the central government and endorsed repeatedly by various multi-state ministerial committees from time to time, it is too little. The rules must also be framed in the same spirit; otherwise the changes made in the Act do not translate into action on the ground. A regulatory authority independent of the Mandi Board must also be set up, to foster competition among the different agri-marketing models without a conflict of interest.

With the government now planning to set up a National Agriculture Market, how will it pan out for e-Choupal?

It will certainly be an opportunity, to plug into the National Agriculture Market Platform and expand the outreach of farmers connected to our system. A pan-India e-market mechanism is a good step forward but we cannot be content with the belief that farmers will now be significantly better off. The reform envisaged in the model APMC Act and the search for new institutional innovations that will deal with these gaps (such as introduction of Options in commodity exchanges) must continue.

How has ITC tweaked the model?

We could only deal in those states and commodities that let us operate. In some states, we still have to get a licence to operate every year.

What was the original plan conceived for e-choupal and what is the current model?

The intent was to make agri supply chains more efficient, through transparent price discovery in the villages. This empowered farmers to decide when and where to sell their produce, without the pressure of sunk cost that was an imperative in the mandi system. When they sold to ITC, their transaction costs got reduced as they were not paying any commissions to middlemen or incurring any labour costs, as they do in a mandi. ITC could source produce directly from farmers, leading to lower transaction costs and, more important, preserving the quality and variety identity through the supply chain.

Over the years, the scope of e-Choupals has expanded to other roles. These include improving of crop quality and enhancing farm productivity. Taking new technologies to farmers through on-farm demonstrations (Choupal Pradarshan Khets), customised crop management content on the e-Choupal portal (Choupal Radio, audio visual Films, Q&As), updates on weather forecasts, enabling access to quality agri inputs and farm mechansiation services are an integral part of the e-Choupal interventions.

We've also spearheaded initiatives under e-Choupal to diversify income streams and create supplementary farm incomes. ITC also assists local communities to create common assets which work towards improving of farm productivity.

Besides the marketing services to farm inputs, the platform also services consumer goods brands, financial services firms, health care and durable consumer product firms to reach rural consumers through the Choupal Haats, Choupal Saagars and Choupal Mahotsavs.

What is e-Choupal's contribution to ITC Foods?

As many as 32 different varieties and quality grades of wheat are sourced through this system. Their identity is preserved through the supply chain to enable Aashirvaad Atta deliver the varied consumer-preferred traits in different parts of the country, in terms of colour, texture, softness, fluffiness of rotis, etc. ITC also leverages its widespread sourcing network, associated infrastructure in key growing areas and entrenched farmer linkages to source quality fruit pulp for its ‘B Natural’ brand in the juices segment. For our ‘Bingo! Yumitos’ potato chips, too, we source the highest quality chip stock potatoes at competitive prices.

How many other are using the e-Choupal network?

About 160 organizations are part of the eco-system. Either they source agricultural commodities or reach out to rural consumers. It could be products or information and knowledge. In most cases, such access is at a fee payable to ITC. In some cases, the access is given free of charge, in the larger interest of farmers and rural consumers, in which case, ITC gains goodwill.

How does the company plan to leverage e-Choupal in the dairy sector?

Much like the wheat case, the dairy supply chains will also be bringing identity-preserved and traceable milk to factories and enable offering of quality, nutrition and health benefits to consumers. Very interesting models of farmer collectives are being experimented with to deliver productivity improvements and hygienic production of milk.

ITC planned to use Choupal Sagar to make its products available in rural India but figures sugges personal care products' penetration in the hinterlands is low.

Personal care products are also fast catching up in rural markets. Choupal Haats supplement Choupal Saagars in promoting products.

What is the way forward for e-Choupal?

The mission of improving the quality of life in rural India will continue to guide e-Choupal evolution, both by raising farm incomes and by bringing quality products to rural consumers. Conservation of natural resources like soil and water will remain central. ITC's consumer brands, already launched and in the pipeline, provide the anchor to all the farm product value chains that trigger this virtuous cycle.

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First Published: Tue, January 05 2016. 00:48 IST