The move will save the milk major ₹15.39 crore per annum.
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Photo Credit: M. Karunakaran

The Tamil Nadu Cooperative Milk Producers Federation, whose popular brand is Aavin, has terminated the contract of 11 clearing and forwarding (C&F) agents, who are part of the milk delivery chain in the city, saving ₹15.39 crore per annum. The termination came into effect from July 3.

They were being paid an additional 75 paise per litre of milk on the condition that they would increase sales to 6 lakh litres per day, which had not happened, leading to the decision, officials said. However, the agents would function as wholesale distributors, who would supply milk to distributors or retailers.

It was in 2019 that Aavin appointed C&F agents in the hope that they would help increase sales. They were chosen from among existing wholesale dealers, who were performing well and selling above 10,000 litres a day. Private dairies had C&F agents in their distribution line.

The termination, which comes into effect from July 3, Saturday, comes at a very opportune time for Aavin, which is trying to make up for a projected loss of ₹240 crore per annum due to the reduction in milk prices by ₹3 per litre. The milk major procures around 35 lakh litres of a day from farmers through cooperative societies, and sells around 25 lakh litres of milk a day, with little over 12 lakh litres being the volume sold in the city alone.

The C&F agents were supposed to deliver milk to wholesalers from Aavin’s dairies on cash and carry method. Though milk sales marginally increased initially by around 40,000 litres a day, it did not go up after that. It remained the same 5.2 lakh litres per day even after the recent reduction in milk prices.

The agents were also resorting to making payments to Aavin through cheques, which they were permitted to do so only for a period of three months, and were holding a credit of over ₹6.75 crore, which was above their combined deposit amount of ₹5.52 crore. Objections to their appointment and functioning had come from various quarters, including a section of wholesale dealers, some of whom had gone to court.

Nominations are open for Fonterra’s board election but a repeat of the drama that rocked the vote three years ago can be ruled out.

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