The company will also increase the number of rural malls, Choupal Sagar, to 20 by March 2006 and 100 by March 2007.
MUMBAI: Fast moving consumer goods behemoth ITC Ltd will scale up its e-choupal initiatives to 20,000 units, covering about 1,00,000 villages by 2009, said Amit Kumar Roy, head of FMCG business, ITC e-choupal.
The company will also increase the number of rural malls, Choupal Sagar, to 20 by March 2006 and 100 by March 2007.
By 2011, ITC aims to have 700 ‘Choupal Sagars.’ The company currently has 5,600 e-choupals in seven states and three Choupal Sagars.E-choupals are rural information centres, where a farmer gets information on prevailing prices of agri-goods in the market, enabling him to take an informed decision about selling his products.
Earlier, farmers would take his produce to the mandi or a wholesale market and sell at the spot price. The e-choupal is linked to international commodity exchanges like the C-BOT, which allows gives the farmer an insight on international price trends.
ITC identifies a location for setting up an e-choupal according to agriculture acreage. “Every e-choupal must have atleast 1000 acres of agriculture land. This may be spread across 5-6 villages,” Roy said.
The company invests in setting up infrastructure, which comprises of a computer, internet connectivity using VSAT, solar panel etc. at a farmer’s premise, who acts as a co-ordinator for the farmers in the area. Since its launch in June 2000, the capital cost of setting up an e-choupal has come down to about Rs 1.20 lakh from about Rs 2 lakh, on account of fall in hardware prices.
The co-ordinator farmer, called ‘sanyojak’, earns a commission on each transaction that passes through him.
The company has taken a major initiative to set up a network of e-choupals to cut the middlemen out in procuring agri-products from farmers.
According to the model pursued by the company, there is a hub for every 30-40 e-choupals, where the goods are physically delivered by the farmer to the company. The decision of selling the goods to the company or the mandi is left to the farmer.
Roy said it takes about Rs 5 crore to set up a Choupal Sagar, and the mall is operationally profitable from day one.
However, the payback period for e-choupal is four-five years. At the Choupal Sagars, agri-input items like fertilisers and seeds, consumer goods like television and tape recorders, apparels, grocery, and even tractors and motorcycles are sold.
The company aims to become a dominant player in the retail segment, and unlike the traditional retailers, it is betting big time on the power of rural India, rather then setting up chains in the metros and emerging metros. Roy said ITC procures goods from the companies directly and passes on a portion of margins to the consumer.
Since the rural economy is of cyclical in nature, where there is liquidity only during the harvesting season, the number of footfalls at any rural retail outlet will also be seasonal.
Special events like kabaddi matches are conducted to drive up footfalls during the slack season. Roy said during peak season, a Choupal Sagar does business worth Rs 5.0-5.5 lakh per day.
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