Under the financial allocation framework submitted to the state secretariat, the ₹5 per litre increase would be divided between cooperative infrastructure and downstream distribution. Of the total revision, ₹4 per litre is earmarked directly for Aavin and district cooperative unions to absorb rising processing, refrigeration, and freight expenses. The remaining ₹1 per litre would be directed to retail booth concessionaires, significantly increasing their existing distribution margin from the current 75 paise per 500 ml packet. Aavin executives noted that thin retail commissions, combined with rising commercial electricity tariffs and urban shop rents, have forced numerous newly established franchise kiosks across Chennai and adjacent districts to shut down within months of opening.

Aavin currently procures approximately 35 lakh (3.5 million) litres of raw milk daily from primary village dairy cooperative societies, with fluid milk sales in the Chennai metropolitan area alone exceeding 15 lakh (1.5 million) litres per day. The cooperative’s current retail price architecture positions consumer packs at substantial discounts compared to private dairy brands: 500 ml orange packets (full cream milk, 6% fat) retail at ₹30 (₹60/L), green packets (standardized milk, 4.5% fat) and purple packets at ₹24 (₹48/L), while blue packets (toned milk, 3% fat) sell for ₹20 (₹40/L). With private processors retailing liquid milk at upwards of ₹75 to ₹80 per litre across Tamil Nadu, Aavin’s price discount has triggered unintended market distortions.

From a supply chain and commercial market perspective, the substantial price spread between subsidized cooperative milk and open-market private labels has led to large-scale diversion toward commercial bulk buyers. Hotels, restaurants, catering establishments (Horeca), tea stalls, and traditional sweet confectioners (halwais) systematically buy up retail pouches from neighborhood Aavin booths to lower their raw material costs. Consequently, neighborhood retail counters frequently run out of supply during peak morning hours, leaving household consumers and cardholders facing artificial milk shortages. Adjusting retail prices closer to market parities aims to curb speculative commercial hoarding while stabilizing booth inventories for urban households.