Even as the Department of IT (DIT) has circulated a proposal to expand the number of village e-kiosks, called common service centres (CSCs), from 1 lakh to 2.5 lakh, firms involved in the first round are calling for a rethink of the business model.
The first round, which was due for completion in March 2008, has only recently crossed the halfway mark, after seeing two large contractors, 3i Infotech and Comat Technologies’ abandoned ship, despite sinking huge amounts in the initial set up.
“It is, undoubtedly, clear that we have not implemented it well. The volumes don’t support further investment,” says Paresh Rajde, MD and CEO of Suvidhaa Infoserve, which runs many bill payment and other ‘facilitation’ centres.
Rajde says Suvidhaa, which inked agreements with many of the contractors, who were setting up village kiosks, was doubtful of the viability of the model suggested by the Department of IT from the first day.
“In 2007, it was projected as a very profitable venture for everyone, where everyone will win. We did not venture into it because it’s not child’s play,” he says.
Under the Rs5,000 crore project, the state governments inked agreements with big private companies such as SREI Infrastructure, 3i Infotech and Spanco for the latter to set up kiosks or CSCs across the state, roughly at the ratio of one for every six villages. While the government claims a roll-out of 80,000 CSCs, Rajde puts the number of functional ones at half of that. 3i, the second biggest contractor with an obligation to set up 11,500 CSCs, announced it was bailing out of its project early this year, after reportedly putting up 6,000 such kiosks. Another contractor, Comat, surrendered its investments and the bank guarantee that it had submitted when it won the bid to set up 5,884 kiosks.
Rajiv Aggarwal, who heads the e-gov business for IT firm Spanco, agrees that the current model needs to be modified before proceeding with the planned expansion.
Under the current model, the contractor is supposed to locate a village-level entrepreneur and help him raise enough finances to set up the kiosk.
The CSC, which will have at least one computer, a printer and internet connectivity, will deliver both government services— such as issuing copies of land records, birth certificates etc—as well as ‘private’ services such as booking train tickets and locating agricultural information on the Internet.
Till the government services are ready by 2014, the contractor would get a fixed amount per CSC, depending on his initial bid, every month to compensate for the absence of government services.
After managing kiosks over the last several months, contractors have realised that even with the subsidy, they are unable to cover their expenses, especially as many state governments are dragging their feet on making services available online.
“There just isn’t enough business. All of us are working on our business model. I won’t say it has been a disaster, but over the next year, we will see a new business model,” Aggarwal says. Spanco, he adds, is in talks with the Maharashtra government to change the contract conditions keeping in view the lower than expected take up for the services.
The ministry, meanwhile, feels the operators’ troubles are their own making. It is currently in the process of collecting comments on its draft proposal to the cabinet to expand the programme from 1 lakh to 2.5 lakh CSCs.
“It was assumed that each CSC would generate revenue of Rs10,000 a month, out of which around a third would be through government-related services. So we were willing to give a subsidy of Rs3,300 per month for the first four years, but it was the operators who bid amounts like zero and even negatives,” pointed out an official at the department.
According to government sources, the operators’ request, to tweak the business model, is likely to fall on deaf ears.
“The success or failure of this venture depends on how good the entrepreneur hired by the operator is,” says another official associated with the roll out from the government side.
“I have seen some CSCs doing extremely well in the same area in Western UP, while others have floundered. The key was to get the right kind of people to head these,” he adds, pointing out that Zoom Developers, which has put up many CSCs in the North East, has managed to make a successful business out of them.
According to the official, at least around 65,000 CSCs are currently operational.
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