The price of milk is set to rise after a move by the State's largest dairy group, Glanbia, to increase its wholesale prices by up to 20 per cent from next Monday. The group, which claims half the national market and a 70 per cent share in Dublin, is not increasing the supply rate it pays to farmers.

"This exercise reflects that costs we are incurring. The return we were getting for milk was eroding due to inflationary pressure," a spokesman said.

Glanbia's average wholesale price will rise by 7 per cent. Asked whether suggestions the wholesale rate paid by some retailers would rise 20 per cent, he said: "In very rare cases there may be a handful of people that might be affected at that level."

The group's dairy subsidiary said its pricing reflected best practice in respect of Competition Law. This was fair and equitable for all its customers and was fully transparent, it said.

It is known that the Competition Authority referred allegations that a cartel was operating in the liquid milk sector to the Director of Public Prosecutions in 1998. The DPP's examination of the case is believed to be continuing. However, Glanbia's spokesman said the new structure was unrelated to "matters which are being dealt with between the group and the Competition Authority".

Price increases paid by wholesalers would reflect volume and Glanbia's increasing costs, he added. The spokesman declined to comment on the impact of the price rise for customers, although retailers are likely to pass it on.

The spokesman said the average 7 per cent rise would add 0.11 per cent to the annual consumer price index if passed on in full to customers.