Primary Industries Minister David Carter has dismissed the idea of an independent regulator to set the farm gate price of milk.
The call for an independent agency has come from Klondyke Fresh, a South Island milk processor and distributor which buys its milk from Fonterra.
Its director Graeme Brown says MAF's proposals to strengthen the transparency and monitoring of Fonterra's farm gate milk price do not go far enough.
He says Fonterra should be made to dump the theoretical system it uses to calculate the price it pays farmers, because it inflates the price other processors and consumers have to pay.
But Mr Carter says the Government supports Fonterra keeping the hypothetical model, but with more more transparency on how it establishes the farm gate milk price and an annual review of that price by the Commerce Commission.
He says public submissions close this week on amendments to the dairy industry laws.
The Government plans to introduce the new legislation in March or April and have it through by mid 2012