itc agribusiness

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Page 1: ITC Agribusiness
Page 2: ITC Agribusiness

ITC's Agri-Businessone of India's largest exporters of agricultural products.

ITC is one of the country's biggest foreign exchange

earners (US $ 3.2 billion in the last decade.

The Company's 'e-Choupal' initiative is enabling Indian

agriculture significantly enhance its competitiveness by

empowering Indian farmers through the power of the

Internet.

Page 3: ITC Agribusiness

Problem in agri-business For ITC For Farmera) Inconsistent supply of raw a) lack of information material.b) Involvement of third party in b) less productivity supply chain.C) Delay in supply c) low price for their product d) Bed quality of materiale) Getting raw material at high cost d) fails to supply on timef) Less production. g) less profit

Page 4: ITC Agribusiness

To enhance rural incomes,there is a need for a system which can…

• …deliver an end-to-end solution

who should be able to take an informed decision !! with farmer having the freedom of choice !

• …deliver effective service

at low cost !!!

And the opportunity lies in building capacity to induce productivity led growth by providing last mile connectivity

©1999-2005 ITC ltd

Page 5: ITC Agribusiness
Page 6: ITC Agribusiness

3 Key Principles• Empowerment

– Information and knowledge free of cost

• Choice – Farmer choice to transact

• Business Model

– Fee to e-choupal Sanchalak for transactions through him

Page 7: ITC Agribusiness

Execution isn’t Easy!• No telecom reach

– They use Satellite communications

• No Power; Erratic Voltage where it exists– They use Solar Power

• First Time Computer Users– Lot of effort on Capacity Building

• Resistance from traditional middlemen– Farmers dealt with them!

Page 8: ITC Agribusiness

Production Channel Prior to e-Choupal

Farmer

Regulated Markets (15-75%)

TraderCommission Agent

Wholesaler (20-80%)

Village TraderGhani

Producer Coop (3-5%)

Cooperative Mill

Page 9: ITC Agribusiness

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-Choupal

ITC

ITC

C

om

mis

sio

n

Page 10: ITC Agribusiness

Transaction Costs in Mandi ChainSoybeans Example

Farmer Incurs

Trolley Freight to Mandi = 120Labour = 50Kacchha Adat = 150Handling Loss = 50

Rs per MT

370

ProcessorIncurs

Commission to Agent = 100Cost of Gunny Bags (net) = 75Freight to Factory = 120Handling at Mandi = 40

335

Total Chain 705

Page 11: ITC Agribusiness

Transaction Costs in Choupal ChainSoybeans Example

Farmer Incurs

Trolley Freight to ITC Hub = 120Labour = 50Kacchha Adat = 150Handling Loss = 50

Rs per MT

370

ProcessorIncurs

Commission to Sanchalak = 100Cost of Gunny Bags (net) = 75Freight to Factory = 120Storage & Handling at Hub = 40

335

Total Chain 705

120

50

Cash Disbursement Costs = 50

215

335

Page 12: ITC Agribusiness

eChoupal benefits the farmer, by

• Enhancing farm productivity Through bundling customised knowledge with

input deliveries

• Increasing farm gate price realisationThrough bundling information with cropping &

output marketing decisionsThrough unbundling produce delivery, cash flow

and pricing

Page 13: ITC Agribusiness

eChoupal benefits ITC, by

• Cutting down net cost of procurement, despite offering better prices to the farmers By eliminating non-value adding costs in the

value chain

• Creating new business opportunitiese.g. marketing several goods & services to the

rural consumerslinking non-farm skill based services of rural

origin with the global markets

Page 14: ITC Agribusiness