Roads have been cleared for Fonterra Cooperative Group to impose a 10c premium on each kilogram of milk solids which it sells to other dairy companies, with Agriculture Minister David Carter having given his nod to the firm.

The decision will take effect from the next financial year under the wholesale or 'default' pricing formula, in compliance with the Dairy Industry Restructuring Act. Currently, the country's third-biggest milk processor Goodman Fielder receives 250 million liters of Fonterra milk, having 95 per cent market share. Goodman Fielder has not its own fibers and it is expected to be provided 275 million liters of milk in the financial year 2010-2011.

The margin on milk depends on seasonal prices of milk and supply during the season, prone to vary with times. The government intends introducing a bill in the parliament in June to regulate price changes.

Milk allocation has increased to 500 million from an initial 400 million liters, with the demand of the cheap statutory milk increasing in the market.