Tamil Nadu has announced another increase in the milk procurement price paid by Aavin to dairy farmers, taking the rate for cow milk to ₹44 per litre from ₹41. The latest ₹3 hike, announced by Chief Minister C. Joseph Vijay in the Legislative Assembly on Monday, is the second increase in less than two weeks and takes the cumulative hike this month to ₹6 per litre.
Importantly, the latest decision concerns Aavin’s procurement price paid to milk producers and not the retail price paid by consumers. The government has said that Aavin’s retail milk prices will remain unchanged.
The decision is expected to benefit around 3.16 lakh milk producers associated with nearly 8,800 milk cooperative societies across Tamil Nadu.
Procurement price rises from ₹38 to ₹44 in August
The latest increase comes shortly after the government raised Aavin’s procurement price from ₹38 to ₹41 per litre on August 19.
With Monday’s announcement, the procurement price has now moved to ₹44, representing a ₹6-per-litre increase in August alone.
For buffalo milk, the procurement price has been increased from ₹47 to ₹53 per litre, according to the government announcement reported by The New Indian Express.
The government said the decision followed repeated demands from dairy farmers, who have been facing higher costs for cattle feed and other inputs.
Rising feed costs put pressure on dairy farmers
Announcing the hike under Rule 110 of the Tamil Nadu Legislative Assembly, Chief Minister Vijay cited the continued increase in the prices of green fodder, dry fodder, mineral mixtures and other cattle-feed inputs.
For dairy farmers, the economics of milk production have become increasingly challenging as the cost of maintaining cattle has risen. Farmer organisations had therefore sought a higher procurement price from Aavin.
The latest increase also follows protests by sections of dairy farmers who argued that the earlier ₹3 increase was insufficient to offset rising production costs.
Government to compensate Aavin for additional cost
The higher procurement price will add a significant financial burden to Aavin.
According to the government, the cumulative increase will result in an additional expenditure of approximately ₹60 crore per month, or ₹720 crore annually.
The Tamil Nadu government has said it will compensate Aavin for the additional expenditure, allowing the cooperative dairy to increase its payments to farmers without immediately passing the cost on to consumers.
This financial support will be crucial for Aavin, which has been under pressure to retain its milk suppliers amid competition from private dairies.
Aavin faces competition from private dairies
The procurement-price decision comes against the backdrop of growing competition for milk supplies in Tamil Nadu.
Earlier reports indicated that Aavin's milk procurement had been affected as some farmers shifted to private dairies offering higher prices and, in some cases, faster payments.
In Tiruchirappalli, for example, milk procurement had reportedly declined, with farmers saying private dairies were offering rates of around ₹50–₹55 per litre for cow milk, depending on quality and fat content.
The shortage has also affected Aavin's supply in some areas, putting pressure on milk vendors and consumers.
The latest procurement hike is therefore not simply a farmer-relief measure. It is also an attempt to strengthen Aavin's procurement network and ensure that the cooperative retains a reliable supply of milk.
No immediate increase in Aavin retail milk prices
For consumers, the key takeaway is that there is no announced increase in Aavin's retail milk price as part of this decision.
The ₹44 figure refers to the amount Aavin will pay for procurement of cow milk from producers. It should not be interpreted as the new price consumers will pay for an Aavin milk packet.
The government has chosen to absorb the additional cost through compensation to Aavin rather than immediately transferring it to consumers.
A significant policy move for Tamil Nadu's dairy sector
The back-to-back procurement-price increases highlight the pressure building across Tamil Nadu's dairy economy.
For farmers, the higher procurement rate provides some relief at a time when feed and cattle-maintenance costs are rising. For Aavin, it could help improve milk procurement and reduce the incentive for farmers to move to private buyers.
For the state government, however, the move comes with a substantial fiscal commitment.
With the latest decision adding an estimated ₹720 crore a year to the government's compensation burden, the challenge will now be to balance farmer incomes, Aavin's financial health and affordable milk prices for consumers.
The announcement also fulfils an electoral commitment of the ruling TVK, which had promised to raise Aavin's milk procurement price to ₹44 per litre.
What the latest hike means
Cow milk procurement: ₹41 → ₹44/litre
Buffalo milk procurement: ₹47 → ₹53/litre
Total cow milk procurement increase in August: ₹6/litre
Beneficiaries: Around 3.16 lakh milk producers
Cooperative societies: Around 8,800
Additional cost: ₹60 crore per month
Annual additional burden: ₹720 crore
Aavin retail milk price: No change announced
The bigger question now is whether the higher procurement price will be enough to bring more farmers back into Aavin's cooperative network and improve the availability of milk across the state, while allowing the government to keep consumer prices unchanged.