The head of the UK's largest dairy firm has defended paying a former Conservative minister £1,800 a day to sit on the company board while the UK dairy industry is facing an "existential threat".

Mike Gallacher, chief executive of Paisley-based First Milk, said former agriculture minister Jim Paice's £90,000 salary for 50 days a year was democratically agreed by the co-operative and externally validated.

Salaries for the rest of the board are shrouded by commercial confidentiality but Mr Paice had to declare his salary in his register of financial interests until he stood down as an MP in March.

Holyrood's Rural Affairs Committee had some harsh words for Mr Gallacher and his Scottish director Jim Baird today over the amount of money the distributor is taking from its suppliers while farmers' profits are being squeezed by plummeting milk prices.

The committee was left wondering "whether First Milk is going to be a going concern in the next two to three years".

One farmer saw his First Milk fees rise almost tenfold when he took in half as much profit while another is losing £200 a day, according to former SNP minister Mike Russell.

He asked if £90,000 for 50 days work was "fair remuneration given the difficulties of the company".

Mr Gallacher said: "I don't know what you expect me to say?"

He added: "The co-op is a democratic organisation. That salary is agreed democratically within the structure of the organisation and it's externally validated, so I don't know what else we can say."

Mr Russell read out "horrific" figures from one farmer who paid First Milk retention fees of £145 last year from a profit of £15,000 for 46,000 litres of milk, but the following year paid nearly £1,200 from a profit of £7,000 for a similar yield.

He said: "How do people survive in those circumstances? I have another constituent that is losing £200 a day, and that is not sustainable."

Mr Baird said: "All of us as producers have to look at our business and see where we can shave costs.

"Obviously, we can't shave them to the extent that the milk price has come back, but that is the reality that we are in now and some of us will have to decide whether the future is in dairy for us."

He added: "We have had discussions with bank managers recently and we all have to go and have a chat with our bank managers because we will need support through this, there's no question.

"You almost need to make another investment in your business and that is predicated on whether you think in the future there is going to be an upturn in the market and your own family situation.

"But I agree, it's not a sustainable position at this time."

Mr Gallacher said: "There's an existential threat for dairy in the UK if this continues and it won't just be us, it will be all producers that will find that our farmers can't sustain themselves.

"That clearly is a significant issue, to the extent that we are a bit away from that and we do work regularly to look at contingency plans for our volumes and how it will affect our business."

Committee convener Rob Gibson said: "We aren't entirely happy with the understanding of the various elements of where you are trying to retain capital in the business through the retention money through the deferred payments.

"We understand why that is but we need to know from you what commitment there is by First Milk to make sure that there is actually going to be a Scottish arm of this in the way forward.

"We're left wondering seriously whether First Milk is going to be a going concern in the next two or three years."

Mr Gallacher said: "If First Milk is going to be successful it will be successful because we all work together in what is a very challenging market context."