CHENNAI: The Aavin Federation and seven district milk producers’ unions together posted a loss of around Rs 143 crore in 2025-26, their worst annual financial performance since the Covid-19 pandemic, as declining milk procurement and continued subsidised sales weighed heavily on the cooperative.
According to Aavin’s unaudited financial figures, the federation, which supplies around 12.5 lakh litres of milk to Chennai every day, accounted for Rs 120 crore of the total loss. The remaining Rs 23 crore loss came from seven district unions — Coimbatore, Krishnagiri, Virudhunagar, Tirunelveli, Kancheepuram-Tiruvallur, Tirupattur and Theni.
In contrast, the other 20 district milk producers’ unions together recorded a profit of Rs 53.2 crore.
Officials said the losses were primarily driven by milk being sold at subsidised prices despite rising production costs, coupled with a steady fall in milk procurement. They noted that Aavin’s average daily procurement has dropped from around 36 lakh litres in 2024-25 to 31-32 lakh litres this year, leaving the cooperative short of nearly four lakh litres a day.
The shortage has affected the production of value-added dairy products such as ghee, butter, curd and ice cream, which generate higher margins. It has also forced Aavin to increasingly reconstitute milk using skimmed milk powder and butter, pushing production costs above the retail selling price, an official said.
“The decline in procurement is largely because Aavin’s procurement price remains lower than that offered by private dairies. This has significantly increased expenditure on milk reconstitution and, in turn, operational losses,” the official said.
Sources said Aavin had urged the previous government during the first quarter of 2025-26 to raise both the procurement price paid to farmers and the retail selling price by Rs 2 to Rs 3 a litre. However, no revision was approved ahead of the Assembly elections, resulting in one of the cooperative’s poorest financial performances in the past decade, excluding the pandemic years.
To improve its finances, Aavin has proposed increasing milk procurement, promoting the sale of Delite and full cream milk, revising the subsidised milk card scheme and expanding sales of value-added products.
An official said the Coimbatore district milk producers’ union had already withdrawn the subsidy under its milk card scheme to curb losses. The state government is also preparing a comprehensive roadmap to strengthen primary milk producers’ cooperative societies as part of a wider overhaul of the dairy sector, the official added.
M G Rajendran, president of the Tamil Nadu Milk Producers’ Welfare Association, said increasing the procurement price was the only long-term solution to arrest the decline in milk procurement.
“The government cannot ignore the rising cost of cattle feed and other input expenses borne by dairy farmers,” he said.
