CHENNAI: Heeding to persistent appeals from dairy farmers, Chief Minister MK Stalin on Tuesday ordered an increase in the procurement price of Aavin milk by Rs 3 per litre. After the revision, the procurement price of cow milk and buffalo milk will be Rs 38 and Rs 47 per litre, respectively.
The revised prices will come into effect from December 18, an official release stated. Notably, there would be no change in the sale price. Milk procurement prices were previously hiked in May 2022. The revised prices will increase Aavin’s annual financial expenditure by approximately Rs 350 crore and will be compensated by the government.
Presently, private brands buy a litre of cow’s milk for a price between Rs 35 and Rs 42, while a litre of buffalo milk is bought for Rs 48 and Rs 52. Producers have insisted on increasing the price of milk by Rs 12 to Rs 14, citing escalated costs ranging between Rs 54 and Rs 58 per litre over past few years.
However, the marginal increase in the procurement price is expected to boost Aavin’s supply of milk with higher fat content, allowing it to compete with private brands. To get 100% of the procurement price, the quality benchmark is 4.3% fat and 8.2% solids not fat (SNF).
Currently, Aavin procures 32.98 lakh litres of milk every day, with 92% of it having a fat content of less than 4%. Only 5% to 8% of milk has fat content between 4% to 4.2%, owing to the low procurement price.
To address this issue, Aavin procures butter and milk powder through the National Cooperative Dairy Federation of India to reconstitute the milk and achieve the required fat content of 4.5% for its standard milk (Green Magic) and 6% for full cream milk, as mandated by the Food Safety and Standards Authority of India.
In the fiscal year 2022-23, Aavin spent Rs 700 crore on this process. To minimise these losses, Aavin proposed to discontinue Green Magic and introduced Delite Milk with a fat content of 3.5%, last month. However, the move was deferred in Chennai due to public outcry.
S Vineeth, managing director of Aavin, said, “With an increase in milk procurement prices, the expenses incurred to reconstitute milk will reduce. The supply of milk with higher fat content will rise. The additional expenses due to hike in procurement prices will be borne by the government.”
When asked if the move would enable Aavin to continue the sale of Green Magic, Vineeth said, “We will continue to meet the customers’ demands with a variety of products.” MG Rajendran of the TN Milk Producers’ Welfare Association said, “The hike is insufficient. The expenses for fodder, mineral mixture, and cattle feed have increased by up to 40% and we incur a loss of Rs 15 to Rs 20 per litre. We need a minimum increase of Rs 12 per litre.”
A section of farmers will supply milk with higher fat content to Aavin now. “If the minimum standards for milk quality are adjusted to 3.9% fat and 8% SNF, instead of the current 4.3% fat and 8.2% SNF, more than 95% of dairy farmers will receive the full incentive of Rs 3. Now, they will get between Rs 1.8 and Rs 2 per litre,” Rajendran added.
Aavin has been facing a severe fund crunch for the past two years as the selling price of toned milk and standardised milk is cheaper by Rs 12 to Rs 14 per litre when compared with private and other state cooperative brands. However, other Aavin products such as ghee, butter, curd and buttermilk are priced competitively.