Wannon MP Dan Tehan is urging Murray Goulburn to chase a federal government funding lifeline for its planned Koroit expansion.

Mr Tehan said he had been in discussions with the cooperative and “fully supported” its development.

“I strongly encourage Murray Goulburn to apply for a regional development program grant,” he said. “The program is focused on local economies like Koroit.”  

His comments came after MG’s interim chief executive officer David Mallinson said the proposed infant formula and nutritional powders plant at Koroit financially did not stack up unless it could secure $50 million assistance for infrastructure upgrades.

Mr Mallinson said addressing effluent and high-voltage power issues were “critical” if plans were to go ahead in Koroit.

“We thought Wannon Water could handle (what we needed)” he said. “They just can’t.”

He said the company didn’t know the infrastructure improvement costs until it “scaled down” the plant. 

“Until (you do) final designs, you don’t know,” he said. 

Mr Mallinson used a visit to Warrnambool on Friday to talk up the dairy giant’s future after a “volatile” year.

Mr Mallinson said despite milk losses, its Koroit factory was still a “major” and “valuable” player in the south-west – the same size as Saputo-owned Warrnambool Cheese and Butter.

“We continue to invest in Koroit,” he said. “It’s very important to us.”

Mr Mallinson said milk supply reductions were not affecting the decision to expand.

“People say that we are struggling,” he said. “This is not the case.”

Mr Mallinson said the dryers to be built at Koroit were not big and only used 45 per cent skim, estimated to be 16,000 tonne of skim milk. 

“We’re putting 50 to 60,000 tonne through Koroit already,” he said.

Mr Mallinson said the company had lost 20 per cent in milk supply – a combined result of farmers leaving and poor seasonal conditions.

“350 million litres have left to supply Saputo and Fonterra,” he said. “We make no excuses for that.”

Mr Mallinson said despite the loss, MG was still the leading dairy company in Australia and had taken on new suppliers this season. 

He said there was an incentive for competitors to undermine it.

“It’s important that we have a strong MG for the dairy industry and for Victorian dairy suppliers,” he said.

“It’s something I’m passionate about.” 

Mr Mallinson said the “exodus” had “slowed” and he now focused on the supply MG had retained.