Farmers are busy digging wells to irrigate their spring crops in Huaxian County, central China's Henan Province, but unlike previous years, they are being paid for their efforts.

Huaxian is listed among the top-100 grain producing counties in China.

The payments, which are valued according to the depth of the well, are part of a series of local government policies to encourage farmers to grow grain.

Nearly all major grain producers in the country have adopted similar incentives for grain production, like slashing agricultural taxes, subsidizing farm equipment and quality seed purchases and providing more loans for grain production.

China's grain output has been declining since 1999. Last year's production was 430.65 billion kilograms, 5.8 percent less than 2002. At the same time, demand for grain totaled 485 billion kilograms.

Experts attributed the fall to many factors, including lack of enthusiasm by farmers in growing grain because of low prices.

To stop the decline and to ensure food security, the central government implemented incentive policies from the second half of last year.

The government also issued Document No.1, the first document in 2004, to underline problems in the farming sector.

The document details the central government's decision to slash agricultural tax rates by 1 percentage point and abolish taxes on special farm produce.

Also, resources will be channeled into the development of regions specializing in the production of key high-quality grains.

Up to 10 billion yuan (US$1.2 billion) will be earmarked from the country's grain venture fund, which is worth 30.2 billion yuan, to compensate farmers for losses caused by low grain prices.

About 70 percent of China's grain is produced in what the document calls "regions specializing in the production of key high-quality grains," such as the three provinces in northeast China, the plains along middle and lower reaches of the Yangtze River and Huaibei Plain in north China.

"As long as the grain output in those major grain-generating regions is stable, the whole country will avoid grain shortages," said Han Jun, director of the agricultural department under the State Development and Research Center.

After several years of falling grain prices, they have increased slightly since last October.

Wu Jingshan, researcher with Henan Price Research Institute, said the increase would help motivate farmers.

In this year's spring seedtime, the planned crop area will reach 50 million hectares, 1.3 million hectares more than the same period last year.

(Eastday.com March 5, 2004)