New South Wales farmers are being encouraged to start growing industrial hemp.

The Government recently passed legislation allowing the plant to be grown for use in products ranging from bio-fuel to dog food.

The Primary Industries Minister, Ian Macdonald, says measures have been put in place to prevent hemp crops being used to camouflage marijuana plantations.

"The licensing scheme is authorised by our Act of Parliament," he said.

"It'll require farmers who wish to grow industrial hemp to register to get a licence.

"That'll mean that their properties will be then audited and inspected regularly to ensure compliance with the Act."

Mr Macdonald says hemp growth could become a lucrative industry for NSW.

"Already we've had over 200 farmers express interest in growing hemp across the state," he said.

"It could become quite a significant crop in a very short period of time, particularly as various companies utilise the products of it for that broad range of products that can be created using industrial hemp as a base."