Milk producers supplying to Tamil Nadu’s state cooperative brand Aavin have raised concerns over mounting financial stress, arguing that current procurement prices no longer reflect the true cost of milk production. Farmer representatives estimate an average loss of ₹1.25 per litre, intensifying calls for a comprehensive cost study and a revision in farmgate prices.
Cost–Price Mismatch Widening
According to producer associations, the cost of producing one litre of cow milk now averages around ₹50, while buffalo milk production costs approach ₹60 per litre. In contrast, Aavin’s procurement prices ₹38 per litre for cow milk and ₹47 for buffalo milk, inclusive of incentives, fall significantly short of covering input expenses.
With Aavin procuring approximately 35–36 lakh litres daily from nearly 3.5 lakh farmers, even a marginal per-litre loss aggregates into substantial statewide income erosion. Farmer groups estimate cumulative daily losses running into tens of lakhs, underscoring the structural imbalance between input inflation and administered procurement rates.
Feed Inflation Driving Pressure
The principal driver behind rising production costs is the sharp escalation in cattle feed and mineral mixture prices. Feed accounts for a dominant share of dairy input expenditure, and prolonged price firmness has reduced margins for small and medium producers. Unlike private dairies, which in some regions reportedly offer higher rates for quality-linked milk, Aavin’s pricing remains constrained by its mandate to supply affordable milk to consumers.
Demand for Scientific Cost Assessment
Producer associations have urged the Tamil Nadu government to commission a scientific study to determine the actual cost of milk production under current market conditions. They argue that periodic revisions linked to verified cost indices would create a more sustainable framework for dairy procurement, similar to price discovery mechanisms seen in other agricultural commodities.
Call for State Support to the Cooperative
Beyond price revision, farmer leaders have called for direct financial support to Aavin from the state government. They contend that, unlike transport or power utilities that receive fiscal compensation for public service obligations, the dairy cooperative receives limited budgetary backing despite its role in stabilising milk prices and supporting rural livelihoods.
Such support, they argue, would allow Aavin to enhance procurement prices without passing the entire burden onto consumers, a politically sensitive issue in a state where milk pricing carries social and economic implications.
Balancing Farmer Viability and Consumer Affordability
Aavin’s last major retail price adjustment dates back several years, with subsequent reductions and targeted incentives altering the pricing structure. However, sustained input inflation has altered the economics of milk production, making earlier benchmarks increasingly outdated.
The current debate highlights a recurring structural challenge in India’s cooperative dairy model: balancing affordable consumer pricing with remunerative returns for producers. Without periodic recalibration, prolonged margin compression at the farm level risks discouraging milk production, potentially tightening supply in the medium term.
Sectoral Implications
If procurement prices remain misaligned with production costs, the consequences could extend beyond farmer distress. Reduced reinvestment in feed quality, animal health and productivity may gradually affect milk yields and quality parameters. Conversely, a well-calibrated support mechanism combining revised procurement rates and institutional backing for cooperatives could stabilise production and reinforce the cooperative dairy ecosystem.
The issue now moves to policymakers, who must weigh fiscal considerations against the need to sustain farmer participation in the formal dairy supply chain, a cornerstone of Tamil Nadu’s milk economy.
