Prime Minister Kevin Rudd said the scheme — open to farmers on blocks of up to 15 hectares — would allow eligible small irrigators affected by drought and climate change to quit farming, while remaining on their blocks.

"This program will provide struggling small irrigators, many of whom have been carrying on farming enterprises that were established by their families several generations ago, with an opportunity to exit the sector while remaining in their family homes," Mr Rudd said.

"The objective is to help these small block irrigators remain in their communities while getting out of the business of irrigation, at the same time as providing greater environmental flows to the Murray-Darling system."

The scheme will cost about $57 million over four years. Small farmers will also be able to gain grants of up to $10,000 for advice and training, and up to $10,000 to help them remove permanent plantings and other farming infrastructure.

South Australian Premier Mike Rann welcomed the plan, but Senator Nick Xenophon, the independent South Australian, said it would cover only 500-600 irrigators across the whole Murray-Darling Basin.

"I believe, and other irrigators believe, it needs to be a lot better, but it's a good step in the right direction," he said.