ITC is one of India’s leading private sector companies with a market capitalisation of around US $ 4 billion and a turnover of US $ 2 billion. It has presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, Branded Apparel, Packaged Foods & Confectionery, Greeting Cards and other FMCG products. ITC believed that the profit margins were not as high as they could ideally have been. To a great extent, it was right. The company did not get the desired results due to several reasons – firstly, it did not have sufficient control over the supply chain of the agricultural produce. For instance, in Madhya Pradesh, soya farmers were generally located at far flung villages scattered throughout the state. In Karnataka, the roles of coffee planters (large and small), traders and agents were not clear. As a result the company did not have any direct control over the quality of the products. As the quality of the products was very important to be able to attract and retain international buyers, ITC suffered. Lack of infrastructure for storage, handling and transportation of the produce acted as a major hurdle. Next on the list was the problem of middlemen or intermediaries. The company was completely dependent on the middlemen for obtaining good quality products. Not just this, the middlemen exerted influence on the farmers by concealing the prevailing market prices and other related information. They also made unreasonable profits for themselves by blocking such information. In order to overcome these problems ITC took recourse to technology. Even in the technologically advanced global business environment of the 21st century, it would perhaps be rather difficult to think of poor, illiterate farmers in the remote, dusty villages of India (in the states of Madhya Pradesh, Uttar Pradesh, Andhra Pradesh and Karnataka) making e-business a part of their daily lives. E-choupal initiative was one such. e-Choupal is a more efficient supply chain aimed at delivering value to its customers around the world on a sustainable basis. Building and expanding the e-choupal initiative was not an easy task for ITC. The company faced several problems like intermediary unrest, widespread illiteracy, outdated telephone exchange and sporadic electricity supply. However, ITC evolved innovative ways to overcome these problems. At places, where the connectivity was poor due to the lack of proper telephone lines, ITC upgraded the telephone lines using RNS kits (RAX Network Synchronisation) and in some cases, by using VSATs2 to by-pass the telephone lines completely. To deal with problems related to bandwidth3, the company made use of specially devised technical solutions to manage data along with new imaging techniques. This way, downloads became faster, thereby optimizing bandwidth use. The company also began capturing the static content locally. To overcome the problem of sporadic electricity at various kiosks, ITC made use of backup batteries, which could be recharged with solar panels. ITC also had to overcome a few government regulatory problems. The Agricultural Produce Marketing Committee Act4 (APMC Act) of India prohibited a company from purchasing certain specified commodities from any source other than government designated mandis. These items included soybean, coffee and wheat, all products that ITC dealt with. ITC persuaded the state governments by telling political and bureaucratic leaders about the benefits of the project to the farmers and others who were involved in it. ITC also made efforts to explain how the Act was impeding the growth of a free market system, direct marketing and competition. As a result of these efforts some state governments amended the Act while others allowed certain exemptions for ITC. However, the biggest challenge for ITC lay in familiarizing the farmers in the remote areas with computers, the Internet and its usage. Luckily, despite the initial hesitation on part of the farmers, there was no direct resistance. And contrary to the expectations, ITC was able to train the very first group of sanchalaks in just two hours rather than two days as it had initially planned for. ITC made use of videos showing farmers using the kiosks. The sanchalaks also helped by retrieving necessary information for those who could not read. According to ITC’s calculations, the investment of Rs. 0.1 million could be recouped within 18 months (three sowing seasons). This looked like a viable proposition and the company went ahead with the work of covering the entire state of Madhya Pradesh. By the end of 2002, Madhya Pradesh had 976 e-choupals spread in 7,000 villages, covering 0.6 million farmers and trading soyabean worth Rs. 1.6 billion.

1. ITC is one of India’s foremost private sector companies. It had been a highly successful company in almost all the industries it entered. Then why did it choose a radical initiative such as ‘E-choupal’? 2. What is ‘E-choupal’ initiative? And what problems did ITC face while implementing this initiative?