The driver behind the retail hikes is an ongoing raw milk production deficit across Tamil Nadu and neighboring southern states. The regional supply crunch has triggered aggressive bidding wars among private processors vying to secure raw milk pools, forcing dairies to raise farmgate procurement prices and offer higher cash incentives to livestock farmers. To absorb these mounting farmgate procurement rates, feed inflation, and operational transport overheads, private processors have passed higher costs directly onto consumers.

The recurring price revisions have heightened operational tension between private dairies and milk distributors. S. Ponnusamy, founder and state president of the Tamil Nadu Milk Dealers’ Welfare Association, criticized private processors for repeatedly raising consumer prices while ignoring distributor margins. The association emphasized that dealers continue to absorb rising fuel costs, vehicle maintenance, shop rentals, and digital transaction fees under an outdated fixed commission structure, urging dairies to adopt a percentage-based commission model.

Furthermore, the price increase has widened the retail price gap between private brands and the state-run cooperative federation, Aavin, which now sells milk up to ₹20 per litre cheaper in several product categories. The significant price disparity is driving a noticeable shift in consumer demand toward Aavin outlets, particularly among low- and middle-income households. However, dealers warn that if consumer demand migrates to Aavin without a parallel increase in state procurement, supply shortages at cooperative retail booths will become inevitable.