CANBERRA, Nov 28 (Reuters) - Australian farmers faced deep cuts to irrigation water use under proposals unveiled on Monday to help drought-proof the country's vast food bowl, a plan set to spark a new fight for Prime Minister Julia Gillard's beleaguered Labor government.
After angry farmers last year staged protests and burned copies of a government water plan, officials released a new, scaled-back proposal to cut water use by 25 percent across the Murray-Darling river basin, an area the size of France and Spain that produces 90 percent of Australia's fresh food.
The draft plan would restore the health of the Murray-Darling basin against climate change that is expected to bring more droughts like one which ravaged the country for over a decade until 2009, Environment Minister Tony Burke said.
However, Burke acknowledged many farmers and affected states would be unhappy.
"There will be arguments up and down the Basin. That's why we've gone (110 years) since Federation without having sensible reform and getting this right," Burke said.
Australia is the world's driest inhabited continent and climate scientists expect it to be hard hit by global warming. Devastating floods which finally broke the last drought earlier this year are thought by many scientists to be a sign of increasing unpredictability of the country's climate.
The independent Murray-Darling Basin Authority, which manages water over an area that is home to three million people across four states, said an extra 2,750 gigalitres (GL) of water a year -- enough to fill Sydney Harbour six times over -- had to be returned to rivers suffering from a century of neglect and over-use for irrigation.
A gigalitre is 1 billion litres (264 million gallons) -- enough to fill 400 Olympic-size swimming pools.
The new water plan is a step down from the 3,000-4,000 GL/year cuts suggested in a previous draft last year.
The Murray-Darling basin is home to cotton and rice growers, 53 percent of grain cereals and 28 percent of Australia's cattle herd, but is also home to thousands of fragile wetlands, including 16 of international importance.
The authority's findings could set up a major fight for Gillard, whose minority government has been struggling in successive opinion polls showing it is likely to be swept from office at elections in two years' time.
While many of the affected farmers and communities already support opposition conservatives, Gillard secured support from Greens and two independent rural MPs for her Labor party by being sympathetic toward their often competing concerns.
"There is never going to be a consensus position. The bottom line is that the system does need reform," Burke said.
The draft said the cuts would be phased in over seven years so that farmers would have time to adjust, while there would also be a period of review and consultation on the changes.
The influential Greens, who control upper house balance of power, said the plan did not go far enough to tackle problems of water over-allocation, while agricultural groups said it had gone too far.
"The impact of this will be job losses, closure of family farms, hardships for regional communities and increases in fresh food prices," said National Farmers' Federation Chief Executive Officer Matt Linnegar.
Jamie Pittock, a water governance expert from the Crawford School of Economics at the Australian National University, said the government had sought a compromise that would not solve water over-allocation, and would need stronger reform in future.
"It is politically very difficult, but from on economic point of view it is fixable. It would be better in this case to go harder and fix the problem once and for all," Pittock said. (Editing by Lincoln Feast and Yoko Nishikawa)