Just days into the new season, the deluge of trade applications lodged already in Victoria's northern irrigation districts have several widely tipped to hit the 4pc cap immediately, rendering the bulk of the State's water effectively off limits for environmental buybacks for the rest of the season.

All that would be left would be river diverters not subject to the cap, who hold about 80,000 megalitres of entitlement on the Murray and 50,000ML on the Goulburn.

Federal Water Minister Penny Wong had lobbied hard for an early lifting of the 4pc cap, due for review next year, as part of the Commonwealth's plans to secure $3.1 billion worth of water for environmental flows over 10 years under its $12.9b Water for the Future plan.

But State leaders at the Council of Australian Governments (COAG) meeting in Sydney last week agreed only to an ‘ambition’ to lift the cap frompc 4 to 6pc by the end of 2009.

Premier John Brumby, who had declared his intention before the meeting to oppose any immediate increase in the cap, said the Victorian Government would only consider agreeing to increase the cap to 6pc in 2009 if a number of strict conditions were met and after consultation with affected farmers.

While his office was not prepared to spell out what these conditions would be, irrigators are lobbying hard for far greater details on how the $3.1b will be spent and steps to be taken to address the impact on rural communities.

The cap was put in place in recognition of the considerable cost involved in providing and maintaining the infrastructure needed to deliver water and to protect those farmers wishing to remain from being forced to shoulder all the costs if the bulk of the water left a district.

The Government has $171m on the table to secure water for the environment over the coming financial year and a further $484m next year.