A week after assuming charge, you promised to increase Aavin’s milk handling capacity to 70 lakh litres a day.
At Aavin, we process around 50 lakh litres of milk and other dairy products a day. To enhance it further, we have launched an expansion programme. The new plant in Karur will help deal with one lakh litres extra per day. We will be creating the necessary infrastructure across the state in the coming months. But now the main challenge is to enhance milk production.
Why are you looking at enhancing milk production? The state is already producing more than 2 crore litres of milk every day.
The problem is that a substantial portion of the total milk produced in the state goes to farmers, their neighbours, relatives and other villagers for local sale. The rest is procured by Aavin through cooperative societies and private dairies, who take a dual stand when it comes to procurement pricing. They pay the farmers well only when there is a demand. Also, the possibility of adulteration possibilities is higher in private dairies.
But Aavin also of late has faced several complaints pertaining to quality.
Aavin’s well-qualified quality assurance team was not used to its fullest potential in the past. We have bridged this gap now right from the first stage when the dairy farmers supply milk to our societies. Instead of lactometers, we now use milk analysers at societies to find out the fat or Solid Not Fat (SNF) levels and adulteration in milk. At the next level, similar tests are carried out at Bulk Milk Coolers (BMCs) in unions. By this, we have ensured that Aavin milk is 100% free from adulteration.
Two years ago, a government audit report pointed out that Aavin did not have enough bulk coolers, and this coupled with travel delays, affected milk quality. All 10,200 samples failed the quality test. What steps have been taken since?
Milk vans, fitted with GPS kits, are micro-managed now to avoid delays. We have enough coolers now and flaws in the refrigerators on wheels were also fixed with help from our in-house technical teams. This has fetched good results for us.
Besides quality, there were complaints about leaky packets. Aavin had earlier reduced the thickness of packaging films to cut costs.
We have increased the thickness (of packaging film) as per industry standards. As a result, our pilferage loss has come down from 0.2% to 0.05% and we haven’t received many complaints of late about leaky milk packets. We are trying to bring it down to zero soon.
Dairy farmers demand better milk procurement prices. But will the government be able to pay them more without changing the retail prices of Aavin milk?
It is challenging to meet the farmers’ demand with the current pricing model. We don’t know how the previous government arrived at this price as there is a huge mismatch between the retail price and the cost incurred in procuring, processing, transporting and selling milk.
Our retail prices are less than our competitors. Aavin’s full cream milk is ₹18 less than the price of its competitor. So, Aavin eventually faces a loss of ₹10 to ₹ 15 for every litre of milk sold. To reduce such losses, we have cut down all possible expenditure. First, we identified thousands of bogus family milk cards which helped us save ₹2.5 lakh a day. Energy-saving measures have brought down daily expenditure by another ₹25 lakh.
So, is a price hike inevitable?
To meet farmers’ demands, we may have to increase prices. But we will take it to the government to see how it can be done. Because of the increase in fuel prices and feed, farmers’ profits have dropped, and the numbers supplying milk are coming down. So, we offer them loans, insurance and subsidies and ensure there are no payment delays. They no longer have to wait months. They receive a payment within ten days now. This is why farmers are getting back to us and Aavin is procuring 3.5 lakh litres more every day now.
Has there been any response after chief minister M K Stalin’s letter to the Centre regarding Amul’s milk procurement activities in Tamil Nadu?
Amul can’t procure milk from TN’s milk shed area. While they are trying to procure milk from border areas, at Aavin, we are focussed on stabilising our market. We have a good infrastructure, manpower and volume of farmers with us. So, Amul will not be able to create any controversy in TN as it tried in Karnataka.
But to strengthen its market, shouldn’t Aavin focus more on its core competency which is milk?
There is a need to concentrate on value-added products because there is a good demand for these products in the market. For example, our premium ice creams, which are of international standard now, and our paneer, help us make profits.
Aavin every now and then comes up with new products like Delite, Brown etc but they disappear a few months down the line. Why?
The reason is that supply and demand did not match. Now, we understand there is scope for Aavin milk varieties in the market. So, we will not reduce supply but will try to enhance procurement.
What’s your next priority project?
We are signing a memorandum of understanding with Anna University, Chennai, and the Indian Institute of Management, Trichy, to improve our transport and logistics, financial management, automation initiatives, and dairy technology and create a standard operating procedure.