CHENNAI : The Tamil Nadu government has announced a ₹3-per-litre increase in the effective milk procurement price paid to producers, raising the total from ₹38 to ₹41 per litre.
Chief Minister C. Joseph Vijay, making a suo motu statement in the State Assembly on Wednesday, said the increase would be achieved through a combination of a higher cooperative procurement price and an enhanced government incentive.
Under the revised structure, primary milk cooperative societies will increase their procurement price by ₹1 per litre, while the State government’s incentive will rise from ₹3 to ₹5 per litre.
This will take the effective procurement price from ₹38 to ₹41 per litre for milk meeting the specified quality parameters.
How the revised price is structured
The existing procurement structure for milk containing 4.3% fat and 8.2% other solids/nutrients comprises:
| Component | Existing | Revised |
|---|---|---|
| Cooperative procurement price | ₹35/L | ₹36/L |
| Government incentive | ₹3/L | ₹5/L |
| Effective price to producer | ₹38/L | ₹41/L |
The announcement represents a 7.9% increase in the effective procurement price compared with the earlier ₹38 per litre.
Tamil Nadu’s cooperative dairy network
The Chief Minister said Tamil Nadu currently has around 8,800 primary milk cooperative societies, which procure approximately 34 lakh litres of milk a day from 3.16 lakh producers.
Of the milk handled by the cooperative network, around 31 lakh litres are sold through Aavin, the State’s cooperative dairy brand.
Also Read: Women Take the Lead in Gujarat’s Dairy Cooperatives as Milk Procurement Rises 39%
The government said the revised incentive is intended to improve the economic returns of milk producers and recognise the costs involved in maintaining dairy animals, including feed and daily labour.
₹360 crore annual financial burden
The enhanced government incentive will have a significant fiscal impact.
According to the Chief Minister, the additional expenditure to the State government will be approximately ₹30 crore per month, or ₹360 crore annually.
The government has decided to bear the additional cost despite financial constraints, citing the welfare and livelihood of milk producers.
The move is particularly relevant to small and marginal dairy farmers, for whom daily milk sales provide a regular source of cash income.
Procurement economics in focus
From a dairy-sector perspective, procurement pricing plays a critical role in maintaining milk supply to cooperative dairies.
Higher procurement prices can improve farmer incentives and help cooperatives retain suppliers, particularly when farmers face rising costs of cattle feed, fodder, veterinary care, labour and breeding services.
However, the sustainability of the revised price will ultimately depend on how the additional procurement cost is managed across the cooperative’s procurement, processing, distribution and retail chain.
For Aavin, maintaining a balance between farmer remuneration, consumer affordability and cooperative financial health will remain important as the revised procurement structure takes effect.
The ₹3 increase nevertheless sends a clear signal from Tamil Nadu: producer economics is being placed at the centre of the State’s cooperative dairy policy.
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