Telecom Regulatory Environment (TRE) 2006 survey results released by ANejman


									                                                                                 Company Number: N(A) 1251

Mobile phones to back farmers by substantially reducing
agriculture transaction costs

25 February 2008, Colombo

Emerging Asia Pacific think-tank on information and communication technologies (ICT)
policy and regulation LIRNEasia has come up with startling evidence on how transaction
costs in agriculture could be reduced by simple mobile phone applications.               The
organization’s Lead Economist, Dr. Harsha de Silva called for a multi-stakeholder action plan
to implement a series of actions that would help poor farmers as well as consumers by
reducing information costs in agricultural markets and value chains. He was speaking at a
panel following a public lecture by Indian Institute of Management Professor, Subhash C.
Bhatnagar, who spoke on the benefits of ICT applications to farmers, taking India as an

eChoupal model, an initiative by Indian Tobacco Company, said Prof. Bhatnagar, is a good
case study how ICTs can reduce transaction costs for the farmers. Electronic market places or
Internet kiosks are set up in houses of a trained farmers within walking distance of target
farmers which they can use not just to sell their produce, but also to receive services
including obtaining information about local weather conditions, farm management and
insurance. This will enable higher incomes for farmers through improved quality and
reduction in transaction costs. Now 6,400 eChoupals are operational in 5 states of India
covering 38,000 villages, servicing 4.0 million farmers, sourcing 13 agri commodities
including oilseeds, grains, coffee and aquaculture products. Overall eChoupals have reduced
the transaction costs to INR 335 (about LKR 1,000) per one MT of vegetables from the
previous figure more than twice of that.

e-Sagu system, another collaborative effort of agriculture research institutions, currently
tested among 5,000 farmers among 40 villages in Andra Pradesh, India has shown providing
information at right time can result in a net reduction in the farmer transaction costs by INR
2,620 per acre. (about LKR 7,900) farmers need not even be literate to enjoy the benefits of
this system, the implementers say.

Helani Galpaya, LIRNEasia’s Director of Strategic Development explained a research project
that her organization undertook in Sri Lanka on reducing transaction costs through the use of
ICTs in the agricultural sector. She explained that transaction costs can account for up to
fifteen percent of a vegetable farmer’s costs, seventy percent of which is the cost of
information, including travel to obtain that information. She demonstrated that if, for
example a farmer were to replace half of those trips with phone calls, the cost of information
could be reduced by 33 per cent. If other methods such as SMS are used, the cost of
information could be further reduced. What this means is that if a farmer had used ICTs to
access information at various points in the production process, his overall costs will be
reduced significantly.

The study also found that the small-scale farmer (in terms of levels of expenditure) feels the
cost of information more than those whose expenditure is much higher because it is a fixed
                     LIRNEasia, 12, Balcombe Place, Colombo 00800, Sri Lanka
       v: +94 (0)11 267 1160; +94 (0)11 493 9992; +94 (0)11 497 9795; f: +94 (0)11 267 5212
                                                                                 Company Number: N(A) 1251

cost. The project examined the transaction costs involved at various stages of the production
process through a survey of 315 farmers belonging to 10 different farmer associations in the
Matale District who sell their produce at the Dambulla Dedicated Economic Zone (DDEZ).

LIRNEasia is a regional information and communication technology (ICT) policy and
regulation capacity-building organization active across the Asia Pacific. Its mission is to
“improve the lives of the people of the emerging Asia-Pacific by facilitating their use of ICTs
and related infrastructures; by catalyzing the reform of laws, policies and regulations to
enable those uses through the conduct of policy-relevant research, training and advocacy
with emphasis on building in-situ expertise.” Additional information is available at

For more information, contact Helani Galpaya – 077 360 0766 or or Harsha
de Silva – 0777686897 or
                     LIRNEasia, 12, Balcombe Place, Colombo 00800, Sri Lanka
       v: +94 (0)11 267 1160; +94 (0)11 493 9992; +94 (0)11 497 9795; f: +94 (0)11 267 5212

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