After years of debate, the NSW Government has approved large-scale industrial hemp farming and will consider licence applications under a new scheme.

Hemp needs little water, grows quickly and the fibrous stems can be used in clothing, cosmetics, building materials, livestock fodder and animal feeds.

The police-approved cannabis varieties all have low levels of tetrahydrocannabinol, the compound people smoke to get high.

"Industrial hemp has the potential to provide farmers with a much-needed additional fast-growing summer crop option that can be used in rotation with winter grain crops," said the NSW Minister for Primary Industries, Ian Macdonald.

"It's a potentially lucrative industry due to [its] environmentally friendly nature."

The new licensing system has been developed to prevent industrial hemp being grown to camouflage illegal crops of marijuana, which looks almost identical although it is cultivated to bear more foliage.

Properties growing industrial hemp will be audited and inspected regularly.

Two hundred people have contacted the department to express an interest in hemp growing.

But the peak farming bodies of Australia and NSW say they do not have policies on hemp growing and are unaware of a major interest in it.

* For information on the licensing scheme or on industrial hemp call NSW DPI on (02) 6938 1966.