A senior official in the Department of Communications, which is responsible for An Post, warned earlier this year the postal market might be unable to bear any more price increases from the company.

In a letter to the Government dated January 13th, the secretary-general of the Department of Communications, Mr Brendan Tuohy, said: "In the light of recent substantial price increases, the capacity of the market to bear further price increases must be in doubt."

His comments were included in an update sent to the secretary-general of the Department of the Taoiseach, Mr Dermot McCarthy. Mr Tuohy was providing details to Mr McCarthy about industrial relations developments at the company.

An Post - as reported in The Irish Times last October - is seeking to increase stamp prices in an attempt to stem losses.

While not officially commenting on the scale of the rise, it is understood the company wants the price of a stamp to rise from 48 to 55 cents. The move has been condemned by the small business group ISME.

The letter from Mr Tuohy, released under the Freedom of Information Act, indicates there was concern in the Department about the idea of a price rise.

The documents also indicate that the Department and the Minister, Mr Dermot Ahern, were angered by the financial performance at An Post.

Minutes from the company's annual general meeting held in late April include remarks by Mr Eamonn Molloy, an assistant secretary at the Department of Communications.

Mr Molloy, speaking on behalf of the Minister for Communications, Mr Ahern, is recorded as saying: "This is the worst financial performance in the history of the company. The company has now been loss-making for three years in a row with further losses forecast for 2004."

Mr Molloy said the scale of the losses illustrated the urgent need to reduce the cost base at the company. He said the Minister clearly recognised the need to raise new revenues, but the main priority was the "existing cost base".

The minutes also record comments by Mr Paul Byrne, a principal officer in the Department of Finance. "An Post has been seeking reductions in headcount for some years, yet the numbers keep on rising." He said it was not benefiting from the huge capital investment made in recent years.

Last night a spokesman for An Post denied the market could not sustain another price increase. He said enhanced revenue generation was part of the company's strategic recovery plan, along with a reduced cost base.

He said it should not be forgotten that An Post was not allowed to have any price increase between 1991 and 2003.