The Dairy Industry Restructuring Amendment Bill, which oversees Fonterra's farm gate milk price-setting process and opens the way for the co-operative to introduce share trading among farmers, has passed its first reading in Parliament.
Primary Industries Minister David Carter told Parliament a review by three Government ministries had confirmed the need for greater transparency in the way Fonterra sets the price it pays farmers through its milk price manual.
He said, while the approach Fonterra takes appears consistent with how the milk price would be set in a workably competitive market, Fonterra could have the incentive and ability to pay a price that could distort the market.
The Labour Party Primary Industries spokesperson Damien O'Connor said his party shares the concerns of farmers about share trading provisions in the bill.
He said Labour was concerned that allowing the trading of shares opened up opportunities for offshore investment.
"We will be seeking assurances that the farmers who will have the shares and be able to have the shares will be New Zealanders, be New Zealand residents and, in fact, be the very people who should be controlling and owning our most successful company."
The Bill will now go to the Primary Production Select Committee for public submissions.
Parliament has agreed to shorten the normal select committee process from six months to four months, a move that worries Federated Farmers dairy chair Willy Leferink, who says there are major issues in the bill that need to be resolved.
The Primary Production Committee has been directed to report back to the House by 1 June.