The Hindu : Companies back e-agri-extension to expand base

Online edition of India's National Newspaper
Sunday, Feb 08, 2004

Business

Business

Companies back e-agri-extension to expand base

By Harichandan A. A.

BANGALORE, FEB. 7. Recently, e-chaupal, a network of transaction-based e-kiosks started by ITC in 2000, got a Rs. 5.80 crore grant from the U.K. Government to sell insurance to villagers using the kiosks.

A group company, Megatop Insurance Services Limited, under contract from Financial Deepening Challenge Fund, sponsored by the U.K.'s Department for International Development, would use the money in three years in villages in Andhra Pradesh and Madhya Pradesh.

The move is the latest from a group of large corporate businesses using a combination of Internet kiosks and agri-extension service centres to transact business with those who grow their inputs. The growers also represent a market for these companies' products, from FMCG to tractor parts, but mostly urea. Local entrepreneurs, who often double as urea retailers, run the kiosks. The companies see the kiosks and centres as a way to penetrate rural markets, expand and retain market share.

In the short term, the transaction-based centres could help make procurement more efficient. For example, the Parry's Corner kiosks were started by the Murugappa group, which makes fertilizers, sugar and confectionaries, to keep track of the sugarcane farmers.

The company has invested about $1 million in the hub-and-spokes kiosks, in Cuddalore, Tamil Nadu.

The users were farmers who supplied sugarcane to the flagship group company EID Parry's sugar factories.

The factories' enterprise resource planning software would allow them to keep track of their accounts with the company. Here was a way to seek transparency in accounting bundled with agricultural extension, education, job typing, e-mail and so on.

For the corporate business, a powerful tool to keep track of who was growing what and how much and influence those decisions, especially if they could forecast market demand to a reasonable degree of accuracy. All this at limited cost to the company, which also planned to make the kiosks pay for themselves by charging a service fee.

Tata Kisan Kendra

Urea market share was at the heart of another million dollar investment by another large company, Tata Chemicals, in Uttar Pradesh, Punjab and Haryana. The Tata Kisan Kendras took a slightly different tack, offering farmers service centres equipped with training and extension facilities. This included soil testing labs and digital libraries of extension material and tie-ups with agricultural universities.

The aim would be, while disseminating knowledge/information on agriculture, to promote long-term use of Tata group products. This has started with fertilizers and pesticides but doesn't have to stop there. Tea and coffee, for example, and in the long run insurance and telephony may be candidates. A fee for channelling loans from ICICI was also part of the revenue model.

In addition to banking on the goodwill generated through the extension programmes, a franchisee network is already in place, comprising mostly the dealers of fertilisers and pesticides, who, with minimum training may be able to sell loans or insurance too.

By targeting what was most valuable to a farmer, his land and crop, the company had struck gold. The company plans to have some 800 franchisees.

Rallis, another group company, making agrochemicals has started its own kisan kendras, for example, in Chitradurga in Karnataka in 2001, buying produce from farmers and supplying retailers like FoodWorld.

Nagarjuna Fertilizer Corporation has invested about $500,000 in setting up 30 kiosks in Andhra Pradesh and 12 in Tamil Nadu, offering farmers a crop practices `knowledge bank' and dynamic data on weather, prices and so on. Industry sources say the company's plans to get the kiosks to pay for themselves through service charges has had a mixed response.

ITC's e-chaupals include 1700 in Madhya Pradesh (for buying soy and wheat), 100 in Karnataka (for coffee), 250 in Uttar Pradesh (wheat and rice) and 70 in Andhra Pradesh (shrimp). The company planned to cover one lakh villages in the next ten years.

Most of these efforts started in the last 3-5 years, and unlike cash-strapped NGO run efforts to make poor farmers literate, are going beyond the pilot phases. Large companies with deep pockets, starting with the more affluent farmers, may not necessarily be bad for the small and marginal ones either.

If by eliminating middlemen, the transaction based centres shore up profit margins for the companies, they were also offering transparency and stabler-than-the-mandi prices, which may make all the difference for the smaller farmers.

A monopoly in the hands of the companies, as they also control credit and soon, insurance, may be a small price to pay.

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