The European Commission said nine member states face a collective fine of €377m for producing more milk than they were licenced to during the 2005/06 financial year.
The provisional fine, €22m more than last year, comes as debate increases over the relevancy of 25-year-old EU milk quotas for today's dairy industry.
Italy, Germany and Poland were set to account for around 90 per cent of this year's fine, although Poland will attempt to pay less by using up spare capacity in its direct sales quota.
The fines will be paid by the milk producers who contributed to quota overrun in each state.
Some in the industry have branded this practice as a sad waste of money for the sector, considering the earnings pressure on both milk producers and processors across the EU.
The European Commission has said it will re-visit the milk quota system as part of a dairy market review in 2008.
There were signs last month the Commission was considering abolishing quotas. "I would note tentatively that more member states now seem to be coming round to the view that quotas are coming to the end of their usefulness," said Paul Christofferson, head of cabinet for agriculture commissioner Mariann Fische Boel, to industry delegates.
Milk quotas will become less relevant for dairy farmers' incomes as EU dairy intervention prices fall further and EU market prices come closer to world market levels, according to Siemen Van Berkum, who recently published an in-depth report on the policy.
The report, which assessed the impact of abolishing quotas as early as 2009, said scrapping the system would likely help larger dairy producers and processors to expand, speeding up the consolidation trend within the sector. Smaller producers could be eased out of the sector through a compensation scheme.
UK dairy officials will meet later this month to being preparing an industry position to present for the 2008 EU agriculture policy review.
A government-sponsored report has predicted Britain is likely to be one billion litres below its 14bn-litre milk quota by 2008.