Royal Mail will be able to charge its rivals more for delivering their letters and parcels to customers' doorsteps under measures intended to counter the biggest revolt of Gordon Brown's leadership.

With rebellion over the proposed sale of a stake in the business spreading to ministerial ranks, Lord Mandelson, the Business Secretary, will also promise today to enshrine in law that the company is and must remain in majority public control.

Postcomm, the present regulator, will be scrapped, and the new regulator, Ofcom, will be expected to grant a more favourable pricing regime to Royal Mail. It will have a duty to maintain the universal service obligation under which letters are delivered anywhere in the United Kingdom six days a week for a single affordable price.

In an important change demanded by many Labour MPs, it will be told to put Royal Mail on a “level playing field” with its overseas competitors in terms of pricing.

Mail operators have long had access to each other's networks, but Royal Mail, the unions and Labour MPs have complained that competitors are unfairly subsidised by the cap on what it can charge them for delivering letters “the final mile” to customers. The operator argues that this costs it £100million a year.

Royal Mail charges foreign operators, such as the Dutch company TNT, 13p an item for the delivery from sorting office to letterbox. The private operator might have a contract with a business to deliver thousands of letters in, for example, Manchester. It would drop all of them at the Manchester sorting office with Royal Mail charging 13p for each - a figure that it claims is unfairly low.

The regulator will decide whether that is the case and may demand efficiencies from Royal Mail. However, if it decides that an unduly low charge is being paid, it will allow Royal Mail to ask for more.

The move may lead to claims that the Government is prepared to see competition wither, and that foreign operators could be scared off by higher charges. Relaxing price controls on Royal Mail could mean that businesses using outside delivery companies - such as TNT - might face higher charges. For the ordinary customer there will be the assurance that the standardised six-day delivery should be guaranteed, but there will be no guarantee that prices will not go up. A first-class stamp now costs 36p.

Pat McFadden, the Post Office Minister, told The Times: “I do not believe competition will go away. That will not be the case. But we want it to be on a level playing field. We are putting in legislation the overriding principle that competition shall be conducted in a way that supports the universal service obligation.”

It will also be written into the legislation that the Post Office will remain in Government hands.

Lord Mandelson pushed ahead with introducing the Bill in the Lords yesterday despite a last-minute Cabinet wrangle over the timetable. It will be published today.

Ministers argued in the Cabinet's Legislation Committee on Tuesday that the present timetable meant that the crucial vote in the Commons would come in the early summer, just as the parties are preparing for European and local elections. But suggestions, apparently from Harriet Harman, the deputy Labour leader, that the process might be delayed met with short shrift from Mr Brown and Lord Mandelson.

“There was an uncomfortable two hours before Gordon sorted them out,” an informed source told The Times. Ms Harman was again privately accused of grandstanding by some ministers.

Today's concessions are unlikely to buy off the rebellion, although some MPs will be relieved that the Government is moving towards them.

One minister said yesterday: “The atmosphere now is hot. People are not going to suddenly say they are all happy. But they will see that we are aiming to meet the points we have been raising. They can no longer say this is the first step towards us privatising the whole thing. In law this will remain a publicly owned organisation and that can only be changed by new primary legislation.”

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