Chief executive Tony Catania said that the company was offering a rebate on money invested in expansion by farmers, in an effort to grow its milk supply.

Mr Catania on Tuesday told ABC Radio that the incentive- based program was introduced because supply had reached only about 50 per cent of the plant's capacity

Mr Catania said that applicants would have to adhere to strict criteria.

"Basically if new farmers or existing farmers are thinking about expanding their dairies by buying new cows, or investing in their infrastructure for example, then there's a rebate that applies to that investment," he said.

"The rebate is based on the value that that additional milk will give to the TDP business and to the dairy farmers themselves."

The opening of TDP's $80million milk processing facility at Smithton last year added 300 million litres of milk processing capacity to the state.

Primary Industries Minister Jeremy Rockliff said that the increase provided encouragement for existing dairy farmers to invest in their operations and incentive for new farmers to enter the industry.

"Now, under the rebate, TDP is offering financial support for young farmers, farming families and new industry entrants," Mr Rockliff said.

"It is available for suppliers investing more than $100,000 to assist in the purchase of dairy land, dairy infrastructure, permanent water or dairy herd.

"While the rebate level is determined by a number of factors, including total supplier investment and expected milk production the investment will return, it can be applied to starting a business, expanding an existing farming enterprise or entering into a new partnership."

Mr Rockliff said that the government welcomed TDP's initiative.