UPDATE: A GOVERNMENT backflip has delivered a potential $100 million boost to Victoria's horticulture industry.

The industry is claiming it is the biggest breakthrough in a decade of fighting fruit fly.

The State Government has scrapped its proposal to declare Queensland Fruit Fly endemic to Victoria, which could have shut down export markets and driven up production costs.

Under the new strategy:

  • Outbreaks in the Goulburn Valley and north eastern Victoria will be amalgamated into a single Suspension Zone, meaning movement of uninfected fruit within these zones no longer requires accreditation.
  • Outbreaks in East Gippsland have been amalgamated into a single Suspension Zone.
  • A new Interstate Certification Assurance (ICA-47) has been developed to assist this process.
  • The Greater Sunraysia Pest Free Area (GSPFA) will be retained under government and industry co-contribution arrangements.
  • Southern Victoria will retain its area freedom status until at least July 1 next year. Commodities will then have to develop trading options including pre or post-harvest treatments.

The industry has welcomed the unexpected reprieve, saying the decision will secure the future of vital fruit growing areas such as Sunraysia and the Goulburn and Yarra valleys.

Murray Valley Citrus Board chief executive Hugh Flett said the move could see fruit fly eradicated from the Sunraysia pest-free area by the end of next year. "There is a very real chance it could be eradicated in the next 12 months due to weather conditions and continued funding," Mr Flett said.

In August the Department of Primary Industries released a discussion paper, which proposed declaring the pest endemic across most of the state - except in the Greater Sunraysia Pest Free Area.

It also suggested funding cuts for fruit fly management that would have handed management to the horticulture industry.

When the paper was released, DPI said it was better to invest money to protect against incoming pests, rather than use it to fight a losing battle.

The Victorian Farmers Federation has been in talks with DPI since August and both parties have held information sessions for growers around the state.

Initially the proposal was set to go ahead by December, but was later postponed to the middle of next year.

VFF horticulture group president Sue Finger said the decision was a big win for the stonefruit, citrus and table grape industries, which would have been most affected if fruit fly was declared endemic - especially those in southern Victoria, which is largely unaffected by fruit fly.

"Declaring the pest endemic would have risked growers losing access to interstate and international markets worth in excess of $100 million annually," Ms Finger said.

"It also meant we would have had to use nasty sprays and fumigation to export.

"I think if we didn't take action, fruit fly might have actually become endemic to most of the state and we wouldn't have been able to fight it."

Citrus Australia chief executive Judith Damiani said fruit fly was the most concerning pest for citrus growers and the industry had invested millions of dollars to protect its pest-free areas.

"This announcement gives the relevant fruit industries and government time to consider a longer-term approach in the fight against fruit fly, and continued access to important export markets."

AusVeg spokesman Simon Coburn said interstate market access was vital for Victorian growers, especially because consumers demanded most vegetables year-round.

He said fruit fly affected vegetables such as capsicum, eggplant and chilli.

Agriculture Minister Peter Walsh announced Monday afternoon the Government's Pest Free Area Committee had been re-formed and was finalising a plan with DPI that could see 18 of 27 outbreak areas cleared this summer.

He said a wider fruit fly suspension area would be set up across the Goulburn Valley to simplify restrictions on growers.

Mr Walsh said there were more than 100 active outbreaks in Victoria and "unprecedented levels of outbreak in the past two seasons".

Ms Finger said a new agreement would have "a different set of management criteria for affected and non-affected areas".

"The Government will also strengthen the restrictions on the Greater Sunraysia Pest Free Area to afford it greater protection," she said.

But the battle isn't over.

Fruit Growers Victoria general manager John Wilson said the Government's retreat from funding was a serious issue.

"Unfortunately funding for eradication hasn't changed," Mr Wilson said.

"We're just waiting for nature to help out with cold winters to control QFF, and that's not the situation you want to be in."

Mr Wilson said he was glad the department had listened to industry, because its previous proposal "flew in the face of its plan to double food and fibre productivity by 2020".

"That extra produce has to be consumed somewhere and declaring QFF endemic would have limited our ability to export it."