Twenty-two dairy firms whose products were found contaminated with the industrial chemical melamine are likely to pay 1.1 billion yuan ($160 million) to compensate families of babies who died or fell sick after drinking the tainted milk, official sources confirmed yesterday.

About 900 million yuan ($131 million) of the amount will be paid in cash as one-off compensation, the China Business News reported yesterday.

The remaining 200 million yuan ($29 million) will go to a new medical fund to cover bills for any lingering health problems related to the tainted milk, a source from the China Insurance Regulatory Commission said.