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eChoupals

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

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eChoupals

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  1. eChoupals A Study on the Financial Sustainability of Village Internet Centers in Rural Madhya Pradesh

  2. 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’ • India’s largest commercial ICT project ITC - IBD eChoupal • Ability to recover investment of ICT infrastructure through a more “efficient” agricultural supply chain

  3. 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)

  4. 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 don’t calibrate the instruments)

  5. 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

  6. 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

  7. Reduction of Transaction Costs

  8. 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

  9. 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

  10. Payback Period Not only sustainable, but eventually profitable

  11. 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?

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