ITC’s ‘Phygital’ model to optimise procurement cost and benefit farmers

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ITC’s “phygital” model involves the participation of FPOs (Farmer Producer Organizations) and the use of digital technology to provide customized solutions to farmers, along with its mantra of giving farmers “the freedom of choice” to sell their produce through market linkages, likely bodes well for the company as it is likely to Optimize the company’s cost of acquisition by ensuring extensive backlinks while helping farmers in better price discovery.

According to Sivakumar, Head of Agribusiness and Information Technology Group, International Trade CentreNearly 100 percent of the company’s sourcing (of raw materials) across value chains and different geographies will be channeled through the system in the next four to five years.

While on the one hand, the diversified conglomerate will help by ensuring raw material security, traceability, cost efficiency and cost reduction, on the other hand, the end-to-end solution offered through ITCMAARS-FPO enabled phygital channel is likely to benefit farmers by accessing better products and services at the doorstep. their homes.

“Today, it is critical to shift the agricultural ecosystem from supply chains centered around traditional production to demand responsive value chains that lead to enhanced competitiveness of farmers. Therefore, ITC has formulated a purposeful collaborative model that focuses on grouping small farmers through military organizations In this model, ITCMAARS acts as a solution integrator, offering a range of functions such as local digital services, free AI-based personalized reports, online marketplace, financial linkages, and access to technology-enabled agricultural services at farmers’ doorsteps, while providing us with agricultural products that can be traced and maintain its identity.Going forward, we envision this model to be a key differentiator for ITC, and most of our agricultural value chain will operate across geographies within this future-ready ecosystem,” said Sivakumar Business line.

The company’s confidence in ramping up the sourcing process stems from a core trust that gives farmers the freedom to sell their produce to any buyer willing to offer the right value. With the exception of a few organic and specialty crops such as potatoes, ITC hardly enters into a contract or purchase agreement with farmers. However, given economies of scale, the company’s natural ability to deliver value to farmers is much stronger as its diversified agricultural value chains are anchored by many strong brands across categories.

“Although the farmers in our FPO model are not bound by any contract to sell to us, in most cases they find value in partnering with ITC for two main reasons – one is our natural ability to deliver value to farmers through enhanced competitiveness from value chains Demand-driven agriculture that underpins our strong food brands and on the other hand, given the freedom of choice, our relationship with farmers is built on a foundation of tremendous trust, which is really the difference in our model,” he said.

According to him, it boils down to whether the demand anchor is in a position to deliver higher value to farmers, and this is where brands come in. However, there is a need to improve productivity, cost and improve quality to ensure that there are no barriers to price increase, which may affect consumer demand, highlighting the need for continuous communication with farmers.

Industry experts and analysts feel that ITC is uniquely positioned with its strong backlinks compared to some of its peers in the consumer goods industry, as it puts it in a better position to control costs.

ITC’s FPO Model A Success Story?

Backed by the knowledge and experience of the two-decade-long e-Choupal program, which has helped create one of the largest rural digital infrastructures enabling more than four million farmers to achieve sustainable gains in crop yield, crop quality, crop income and market access, the center of commerce has been International is able to do so Take advantage of the ITCMAARS-FPO phygital platform To provide a comprehensive solution for farmers.

ITCMAARS currently covers 1105 FPOs across nine states including Uttar Pradesh, Rajasthan, Madhya Pradesh, Maharashtra, Bihar, Karnataka, Andhra Pradesh and Telangana (West Bengal next year) with a registration of 5.1 lakh farmers. Within the current watershed, the goal is to expand outreach to 10 million farmers and bring the total number of FPOs to 4,000 in the next four to five years.

Highlighting the key value that ITC brings to the FPO model, he said, the company has been able to combine all four components, including governance, compliance, market linkage and operations management, to ensure capacity building for FPOs and provide the necessary support on hand.

“As a result of all this within one season of this capacity building, more than 50 percent of farmers in ITC’s FPO ecosystem are able to transact versus less than 10 percent in the normal course. Typically, FPOs are seen to be It needs a lot of time to build.While it is true that it takes time to mature and develop, the success of the model depends on creating an ecosystem that ensures the viability of FPOs by holding hands, while incentivizing farmers to actively participate in the system by demonstrating value through 360 Grade, comprehensive and well-organized services.”

The company expects close to 100 percent of all output and input transactions through the platform in four to five years.