Delayed Payments and Price Cuts Impact Tamil Nadu Dairy Farmers

Tamil Nadu's dairy farmers are under financial strain as government-promised incentive payments exceeding ₹200 crore have been delayed for four months. This delay has disrupted cash flow for nearly 400,000 producers, affecting village-level cooperative societies' ability to cover operational costs.

The situation worsened with a ₹3 per litre milk price cut, leading to an estimated ₹550 crore annual loss for Aavin, the state-run dairy cooperative. Unlike other state entities that receive direct financial support for operational losses, Aavin has not been compensated for these losses.

To manage the crisis, the government allowed Aavin to use internal funds from the Milk Cooperative Federation to settle some arrears, though payments for subsequent months remain pending. Despite a partial settlement, cooperative financial stability has been further challenged.

Aavin's Managing Director, John Louis, emphasized the need to balance farmer incomes with affordable consumer prices, especially in urban areas like Chennai. While he stated that most cooperatives remain profitable, farmers argue that diverting funds to cover arrears has reduced dividends and increased losses for several societies.

In response to the financial distress, the government introduced a ₹3 per litre incentive from December 2023 and revised procurement prices to ₹38 per litre for cow milk and ₹47 for buffalo milk. However, farmers warn that without timely payment of outstanding dues, the dairy supply chain's stability remains at risk.