Empowering Indian Farmers: ITC's Remarkable Contributions and Initiatives

The Indian Tobacco Company (ITC)'s ground-breaking business concept has transformed the lives of 4 million farmers in 35,000 Indian communities. The best part is that they did not accomplish this by acts of kindness but rather via the use of an excellent business plan that even raised farmer income.

This incident happened in 1999, which was a very bad year for ITC's agricultural export segment. In 1999, Madhya Pradesh's rural areas produced 4 million tons of soybeans, or 80% of all the soybeans produced in India. At the time, soybeans were one of ITC's primary export exports. 80 percent of this production was transformed into soy meal, which was given to livestock and poultry. Last but not least, ITC started exporting soy milk to countries including China, Pakistan, Bangladesh, and even the United Arab Emirates. The remaining 20% was then transformed into edible oil, another good-quality food item in high demand.

Therefore, it was anticipated that the soybean industry as a whole would be quite profitable. And it was said that the soybean farmers were tremendously affluent. The bulk of the soybean farmers in Madhya Pradesh, however, were struggling with debt when they didn't even have enough money for the coming season, leading to unhappy lives. Furthermore, even businesses like ITC that were growing these commodities failed to make a profit. So, the question remained: How was it possible that, despite there being a huge demand for soybean on the international market, neither the farmers nor the export businesses were able to make large profits? As it turns out, there is a considerable inefficiency in the supply chain for soybeans. And that is how events have developed. Farmers, the APMC, or agricultural produce market committee, export companies like ITC, and wholesalers made up the supply chain's three formal components.

The government created the APMC, which was merely a collection of authorized merchants, to protect farmers from being taken advantage of by open commerce. Another name for it is the mandi. As a result, only merchants with official licenses were allowed to buy produce from the farmers in the mandi. The idea behind these dealers' auction for the crops was that the highest bidder would then purchase the crops from the farmers.

The intention was for the farmers to reap the rewards of the best pricing and make a fortune doing so. However, this was untrue in three crucial respects. First off, 30 to 50 kilometers separate the farmers from the mandis, and more than 80% of farmers in our country are still small farmers. As a result, the majority of them either had storage M facilities or couldn't afford transportation facilities.

In order to avoid having to rent a truck, they were compelled to sell it to a junior contractor, who then sold it to the senior contractor, who brought it to the mandi. It goes without saying that they have to cover the cost of shipping or give these middlemen a very low price for their produce. Second, farmers had no way to find out the exact price being provided at a particular mandi on a particular day. They were left with little alternative except to rely on rumors and take a chance of traveling 50 kilometers in the hopeless belief that it was genuine.

Finally, because no other merchant was allowed to buy crops from the mandi, the authorized traders banded together to form a cartel and fixed a price that was much lower than what other merchants were willing to pay for the produce. When one quintal of soybeans was supposed to be sold for 8000 rupees, for example, the dealers would all suggest a price of 6000 rupees, giving the farmer a profit of 2500 rupees per quintal. 1700 farmers are unable to turn around because they have already traveled 50 kilometers, and they have nowhere else to sell their goods. The farmer had no other option except to sell his goods to the approved traders for a profit of no more than 500 rupees.?

The farmer selling it to the junior contractor would, in the worst case scenario, witness a further fall in income from 500 rupees to less than 100 rupees, and occasionally even a loss. Even worse, the price was only raised by 500 rupees, thus aggravating the situation. The mandi traders did not pay the farmers immediately away; rather, they accepted the harmed produce on an unofficial credit and paid them whenever they made a profit. And the length of this credit period could range from a week to a full month. This pathetic system also pushed the farmers into a very hazardous vicious spiral.?

Farmers invested less in agricultural equipment and other essential inputs like pesticides and fertilizer as a result of having insufficient cash flow. Additionally, as part of this project, ITC provided a Windows PC, an internet connection, and a dot matrix printer to each of the village centers covered by its umbrella. To help farmers decide when to plant their seeds and prevent doing so at the wrong time, they developed a website called soyachaupal.com, which featured three of the most important information tabs for farmers, data, and weather forecasts. The second place went to the best practices section. For example, it was suggested that objects be placed 18 inches apart.

He naturally put in a lot of effort to help the farmers use the computer and boost their output as a result of the incentive. Thirdly, ITC convinced the government to allow the company to purchase the goods directly from the farmers in exchange for a fair price and permission to create a successful and profitable supply chain. That's all, ladies and gentlemen. In 1999, the E-implementation phase began. At that time, ITC had 44 contact points in Madhya Pradesh that 80% of the state's farmers could use to transport their soybean harvest, including five processing facilities, 39 warehouses, and more. And that's how the system functioned. And because of this wonderful system, the farmers were able to spend a lot of money on farming equipment, which led to an increase in production and, eventually, fatter margins and more cash flow for them.?

Even ITC was able to save $3 per tonne on shipping thanks to this system's brilliance, which also allowed the farmers to earn $8 more per tonne despite all of these subsidies. ITC also discovered that this choice was quite beneficial because it allowed them to get discounted raw materials from farmers, which they could employ for their Fast-moving Consumer Goods division. Furthermore, each E-chaupal endeavor is currently reaching more than 4 million farmers in 35,000 villages across 10 different states, outpacing all other internet-based interventions in rural India. Among the crops farmed now are soybeans, coffee, wheat, rice, lentils, and even shrimp.

Here is the incredible story behind the E-chaupal project.