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CSC: future bright, present a bit tight

The viability of telecentres in rural India will depend on the workable business
models in delivering health, agriculture extension, education and training services

Pratap Vikram Singh | August 29, 2013

The approximately 1 lakh rural internet kiosks set up by the government are soon going to be
one-stop shops for government-related services. Be it opening a bank account, applying for voter
ID card, updating Aadhaar database or applying for a skill development programme its all
going to happen there.

As per plans, these kiosks will deliver services for banks, unique identification authority of India
(UIDAI), direct benefit transfer, election commission and educational and skill development
agencies.

In the past, common service centres (or CSCs), set up under the public-private partnership mode,
remained largely inactive in the absence of public and business-to-consumer services. It
primarily owed to the lack of efforts on the part of government and private organisations running
the network.

Thanks to the initiatives undertaken by the government and private agencies, CSCs could become
an integral part of village infrastrcuture. According to CSC Special Purpose Vehicle (SPV), set up
by the department of electronics and information technology (DeitY) to oversee implementation
of the CSC scheme, 25,000 CSCs will soon be made business correspondents (BCs) offering
savings, withdrawal and micro-loans. About 5,500 CSCs offer financial inclusion services at
present. The CSC SPV has signed MoUs with 26 banks for this purpose.

In future, you will have all 1 lakh CSCs (operating) as business correspondents because banks
are realising that a CSC is a more stable and reliable agent, says Dr Dinesh Tyagi, CEO, CSC SPV
(see interview in following pages). He says the ultimate aim for providing banking services
through CSCs is to facilitate the direct benefit transfer (DBT) scheme, through which the
government aims to distribute '3 lakh crore annually.
Ultimately, we are eying for roll-out of DBT through CSCs. If every CSC could become a BC
(business correspondent), each village-level entrepreneur (VLE) will be able to do business of '3
crore. In Jammu and Kashmir, CSCs are also helping citizens get loans, apart from being just
BCs, Tyagi says.

Last years commission earned by 460 of the total 700 VLEs was '5 crore, he adds. CSCs have
also emerged as permanent enrolment centres for UIDAI. As of now, 800 CSCs have become
permanent centres. The CSC SPV plans to scale this to 5,000 enrolment centres by December.
The election commission, too, has tapped the CSC network for outreach in rural areas.

One simply can walk in to get a voters ID card, updating voter ID database and taking printouts
of electoral rolls and list of polling booths, says Dr Alok Shukla, deputy election commissioner.
The roadmap for the roll-out of these services is being worked out. We get reports of officials
asking for bribe for making a voters ID card. (But) this monopoly of officials will be over very
soon when the services are extended to the 1 lakh CSCs, he says.

The ministry of women and child development is also using services of CSCs to reach e-literacy
among women. Under its Innovative Project for Empowering Rural Women, the ministry plans
to train 25,000 women on basic digital literacy in Chhattisgarh, Maharashtra, Punjab, Tripura,
Uttar Pradesh and Rajasthan.

DeitYs own organisation the national institute of electronics and information technology
(NIELIT) runs a digital literacy programme to make one person from each family e-literate
through the network of CSCs.

According to experts, rural internet kiosks have fared badly in the past due to multiple
challenges. Only 19,000 centres (of the total 1 lakh, as claimed by the government) are
transacting, or providing services, once in a month, according to data provided by the CSC SPV.
The transactions are monitored through a web portal which registers the transactions at the
centre when accessed by the VLE.

According to Tyagi, the number of centres could be more, as the anti-virus software being used by
some VLEs does not allow the web portal programme to function. Some 70,000 centres are
operational across the country at present, according to reports collected by DeitY from the states.
The figures, however, are not very reliable as they are provided by the SCA. There is no
mechanism put in place by the states to cross-check the figures.

The major challenge with running the centres has been the lack of financial support for VLEs,
which becomes necessary in the complete absence of the government-to-citizen services that are
the main attractions of any CSC. In the tendering process, the government had provided for a
support of '4,000 per centre (the amount was higher in the northeast states, Jammu and Kashmir
and a few Maoist-affected areas) for the initial four years. This funding is distributed between the
SCA and VLE primarily to compensate for the unavailability of online government-to-citizen
services, as NeGP was still at a nascent stage of implementation.

However, during the tendering process, many companies won projects by making their bids as
zero, even negative, in the expectation that these centres will be a golden goose as they saw huge
amounts invested in social sector programmes, the MNREGS being one of them.

According to CSC SPV, 50,000 centres were set up based on zero bidding. But private players
who won CSC projects through negative bidding, like 3i Infotech and Comet, backed out in the
initial two or three years itself. Amid all this, VLEs found themselves in a fix. They neither had
fiscal support from the government in the form of funds nor online services through which they
could offer certificates and licences.

Making the kiosk viable became their priority, which ideally should have been the delivery of
public services. Another challenge is the failure of the authorities in evolving a standard model
for delivering government to citizen services. Aruna Sundarajan, principal secretary with the
Kerala government and former DeitY official, says that over the years DeitY has not been able to
ensure a minimum number of services that could be delivered from CSCs.

There is a need to create a standard, national model for specific services in the fields of health,
education, financial inclusion and PDS that can be delivered across all 35 states and UTs from the
CSCs, Sundarajan says. Apart from unavailability of services, the centres have been largely
inactive in the absence of business-to-consumer services catering to requirement of the local
community.

Only SCAs that have been able to cater to the needs of the community have achieved modest
success. These SCAs are specialised in either delivering education, agriculture or e-governance-
related services. Take, for instance, Basix, a leading name in microfinance too. The SCA, which
operates in five states, is into promotion of development enterprise in rural areas.

VLEs under Basix are offering soil testing and selling high-value butlow-volume agro-products,
such as vegetable seeds and micro-organism. According to Vijay Mahajan, founder and chairman
of Basix, the rural-urban divide is shrinking in the context of aspirations and purchasing power of
the people. But this divide is present in terms of distribution and infrastructure hindering the
accessibility to a wide range of services. The CSCs could be a leveller, says Mahajan.

While Basix is yet to earn profit in the CSC business, Mahajan is optimistic and is willing to have
a long break-even period. So has been the case with Bhopal-based AISECT, which specialises in
IT training and education services. AISECT operates in Madhya Pradesh, Chhattisgarh and
Punjab at present. CMS Computers, which operates in Maharashtra, Madhya Pradesh, Uttar
Pradesh, Rajasthan and Andhra Pradesh, is one of the SCAs that has been able to break even,
according to the firms officials.

The company has experience in providing e-governance solutions since the days of e-seva one
of the earliest e-governance initiatives launched in Andhra Pradesh in 2003-4. In Maharashtra,
CMS went ahead and developed applications for a semi-automated process for delivery of
services, after government approval. According to CMS officials, the company sought
participation of district magistrates in initiating e-governance at the district level.

As network connectivity improves perhaps after the national optical fibre network reaches
every single 2.5 lakh panchayats CSCs can actually become an enterprise where facilities like
telemedicine, tele-education, agri-extension and training could be offered in villages.

But this will not be a cakewalk for DeitY and SCAs, as these facilities would require industry
participation and can only be feasible with a workable business model a model in which the
applicants are willing to pay for the virtual delivery of health, education and training. But as of
now, the government and SCAs are yet to reach clarity about such workable business models.

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