Swiss food giant Nestle will work with its partner city in northeast China to make improvements and replace a manager in charge of milk collection at a local subsidiary that has been accused of cheating local farmers for years, a company executive said.

Nestle does not tolerate cheating and is carefully investigating the matter, said Eldert Heijkoop, general manager of Shuangcheng Nestle Co., Nestle's joint venture in the city of Shuangcheng in Heilongjiang province.

A Dutch proverb says 'where there is smoke, there is fire,' Heijkoop said, adding that media reports allowed Nestle to "see the smoke" and the company is now "tracking down the fire."

Previous reports said that several milk-collecting stations run by Nestle in Shuangcheng have not been following government-mandated prices when paying local farmers. The reports also said that the stations have been using a rounding system that favors the company when weighing the farmers' milk.

The reports stated that most farmers have to milk by hand because milking machines are rarely used in Shuangcheng, despite the Ministry of Agriculture's efforts to make the modernized devices popular.

Heijkoop said that Shuangcheng Nestle has reset its point-of-sale (POS) devices to make them more accurate and abolished the rounding method, adding that the company will replace the manager in charge of milk collection with a new manager next week.

"Nestle's presence has boosted the development of the dairy industry, increased the city's fiscal revenues and made positive contributions toward industrial restructuring. The Party committee and government attach great importance to the opinions of milk farmers regarding the milk-collecting stations," said Shuangcheng's Communist Party of China (CPC) chief Lu Zhimin.

An investigation found that several milk collectors adjusted their POS devices to allow themselves to manipulate their measurements, according to Luan Xue, the chief of Shuangcheng's animal husbandry bureau.

Shuangcheng will welcome social supervision by placing a "fair scale" for weight verification in each of the 76 milk-collecting stations and launching service hotlines for farmers, Luan said.

The city is also organizing a vote by farmers to decide if the station chiefs should go or stay, Luan added. "A station chief must be replaced if he cannot get 30 percent of their votes," he said.

Nestle (China) Ltd. Spokesman Dong Yuguo told Xinhua late Tuesday that Nestle and Shuangcheng have mapped out a plan for the development of the local dairy industry, including mechanized production and large-scale cattle farming.

Heijkoop confirmed that Shuangcheng Nestle will buy 1,000 milking machines for farmers, adding that the machines will be put into use by the end of this month.

"After seeing the reports, Shuangcheng decided to put its planned large-scale cattle farming program into action at an earlier date. By the end of 2012, the city will have 187 farms with more than 1,000 cows each, and Nestle has agreed to pay 0.36 to 0.6 yuan more for every kilogram of milk purchased from these farms," Luan said.

As for Nestle's alleged monopoly in Shuangcheng, Heijkoop said that his company, which began operating in 1990, has helped a lot of farmers develop their businesses and does not intend to monopolize, as other dairy firms are welcome to compete.

Heijkoop said that the city government's share in Shuangcheng Nestle is a "historical issue" and that the share has decreased from 15 percent to 2.99 percent as Nestle's investment has expanded.

Ex-mayors of Shuangcheng are not paid for acting as board chairmen in the joint venture, but their posts have enabled them to help the company and the industry grow while protecting farmers' interests, Heijkoop said.

The current mayor is not on the board, he added.

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