ITC: Enduring Value

Sab Saath Baadhein

Media Centre

Rewarding resourcefulness, lifting lives 02 Jul 2005

The Hindu Business Line

G. Ramachandran

Distance, social discrimination and formal regulations often keep small and poor farmers out of the market. The e-choupal scheme initiates a reversal in this trend and empowers the farmer by providing reliable information and access to markets where they can get competitive prices for their produce says G. Ramachandran.


The e-choupal scheme: Empowering the small farmer instead of exploiting poverty.

INDIA'S farm sector is a source of explicable embarrassment as well as unbounded opportunity. The causes for the embarrassment are obvious. The farm sector is wholly rural; the rural economy is starkly poor. And, most Indian households are simultaneously rural and poor. They constitute 72 per cent of the population and account for 75 per cent of the poor. Moreover, rural households account for 75 per cent of the country's workforce. The principal descriptors and indicators given above have changed for the better over the last four decades, but only marginally. There is little evidence of any tidal wave of improvement or development.

This is embarrassing given that the Green Revolution is about four decades old. So, India's poor, India's farmers and India's villagers need something that generates hope and incomes. They need something that goes beyond arcane issues such as food security and genetics. They need something with which they can tap their resourcefulness and lift their livelihoods. They need something simple, local and people-friendly to heave themselves out of a deep hole.

If you have known all along or have inferred that the poor, the farmers and the villagers are the same people, then it is easy to regard the farm sector as the source of unbounded opportunity. ITC's e-choupal has done exactly this since June 2000. It regards poverty, farming and rural livelihoods as interrelated issues. It regards rural poverty as the result of how rural society and the rural economy are structured.

E-choupal is simple and people-friendly. But the e-choupal initiative is not local. It includes 5,250 e-choupals in 31,000 villages in six States. It serves three million farmers. It has brightened their prospects of higher incomes. It has delivered on all the promises made. Thereby, it has enabled more than three million households to lift themselves out of poverty over the last five years.

Lightning quick

E-choupal is characterised by a high-impact, low-inertia business model. It is significant in that its economic vigour is wholly predicated on the resourcefulness of the people it serves. Its relevance is unrelated to resources. Therefore, it has rapidly impacted the whole agricultural chain — seed to harvest to prices to market to money in the bank — in the locales it serves.

Since e-choupal is people-friendly and dependent on resourcefulness, the intended benefits have reached its beneficiaries at lightning speed. The first round of empirical analysis of the impact of e-choupal shows that incomes from farming and support services have risen by over 38 per cent since 2000. In particular, a survey by Prof Sanjiv Phansalkar of the Institute for Rural Management, Anand shows that incomes from farming have risen by about 10 per cent in 2004 alone in locales served by e-choupal.


Depressing contrast

By contrast, India's agricultural sector has grown at less than 1.5 per cent in the first three years of the Tenth Plan, which had set an ambitious growth target of 4 per cent for agriculture.

The Prime Minister, Dr Manmohan Singh, has drawn attention during the 51st meeting of the National Development Council, to the depressing deceleration in growth since the mid-1990s. Agriculture had grown at 3.2 per cent between 1980 and 1996. It slowed down to 2.1 per cent during the Ninth Plan. The Prime Minister has said that it is not surprising that a perception has grown that the benefits of growth have bypassed a substantial section of our people. It may be fair to add that agricultural growth may have bypassed locales not served by e-choupal.

Candid and ambitious

The Prime Minister has chosen to discuss the problems facing agriculture squarely and boldly. To start with, he has not blamed the monsoons. He has asserted that the problems with agriculture go beyond weather and that there has been a loss in momentum. He is of the view that a deeper problem affects India's agricultural strategy. He has asserted that correcting the deeper problemmust be accorded highest priority.

Though the Prime Minister has not explicitly presented poverty, agriculture and rural livelihoods as interrelated issues, he has presented agriculture as a chain of related activities. He has called for action on several fronts for overcoming the stagnation in agriculture. He has called for focus and attention. Quite unsurprisingly, he has presented the case for an increase in investments in the entire chain of activities related to agriculture — the supply of inputs and credit, diversification of crops, better production practices and improved post-harvest management. The Prime Minister has called for toning up the agricultural credit system towards ensuring supply of adequate credit at a reasonable cost.

Problem redefined

It is an old habit in India to see every economic problem as the result of a shortage of capital and investments. If the availability of capital is not the issue, the interest rate is. So, the prescription for solving every economic problem is the same: Massive investments at low interest rates. It is not surprising that many economic problems have remained unsolved for decades.

E-choupal does not see India's agrarian and rural poverty as the result of capital shortage. It does not place any significant emphasis on massive investments for solving the problem of rural and agrarian poverty. E-choupal has correctly regarded India's agrarian and rural poverty as the result of a cruel situation faced by India's small and poor farmers, which forces them to operate and transact in `un-evolved' markets. Farmers and rural households remain uninformed or inadequately informed in these un-evolved markets because of adverse societal and economic structures.

Two examples come to mind. First, many farmers do not have access to information on the lowest price to pay for an input. Second, most do not have access to information on the highest price at which they can sell their output. Farmers and rural households lose out in the information dimension. So, farmers pay higher prices for their inputs and receive lower prices for their output compared with the best. The result is lower incomes and listless livelihoods. Farmers lose out in the transaction dimension too. Again, two examples come to mind. First, many farmers may not have access to the markets that sell inputs at the lowest prices. Distance, informal social codes and formal regulations often keep small and poor farmers out of the markets for low-cost, high-quality inputs. Second, many farmers may not have access to the markets that pay them the highest prices. Distance, social discrimination and formal regulations often keep small and poor farmers out of the markets that pay the highest prices for their high-quality output. So, once again, farmers buy inputs at very high prices. They sell their output at very low prices.

The mandi exacerbates the latter problem (see Business Line, December 28, 2004). The result is lower incomes, crushed hopes and poor growth.

Problem solved

E-choupal applies information technology to the advantage of India's small and poor farmers who have hitherto operated and transacted in un-evolved markets. It solves the value-sapping problems caused by distortion of information and distance to markets. First, it provides access to reliable and high-quality information on the weather, inputs, produce, markets and prices free of cost to farmers. Second, it provides access to markets that sell high-quality inputs at the lowest possible prices. Third, it provides access to markets where buyers pay the highest possible prices for farm produce.

Shining results

E-choupal has favourably impacted the chain of activities related to agriculture. Produce quality and volumes have risen. Prices of farm inputs have declined and quality of inputs has risen. Prices of farm output have risen. Small and poor farmers have been the principal beneficiaries. Their cost of transactions has declined. Their incomes have risen.

What is more, small and poor farmers have typically derived these benefits within three months of the arrival of the e-choupal in their locales. They have not had to wait for plans, approvals, massive investments and mid-term appraisals.

The reasons are obvious. E-choupal rewards resourcefulness. It does not exploit poverty. It empowers the small farmer. It has reversed the traditional sequence of development. The traditional sequence of development has plans, approvals, massive investments, mid-term appraisals, poor growth and frustration. By contrast, e-choupal begins with frustration with the traditional sequence and ends with hope, fulfilment and growth.

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