Luke Harding in Hadda sees dramatic evidence of the war being waged on the drugs trade by the hardline Taliban

The mud-walled village of Hadda in south-eastern Afghanistan used to consider itself lucky. The farmers who live here had not one but two lucrative sources of income.

There were the Buddhist relics that could be dug out in darkness from the many ancient stupas or shrines that littered the undulating valley and its jagged white mountains. And there was opium, a crop that flourished in neat plots, transforming the landscape every April into a sea of green and red.

But this year things are different. In a development that has gone unnoticed and unrewarded by the international community, Afghanistan's fundamentalist Taliban rulers have dramatically ended the country's massive opium trade, The Observer can reveal - a move that has also plunged Hadda's farmers into despondency and debt.

Western sources in Kabul yesterday confirmed poppy production in Afghanistan had virtually ceased. This follows an edict issued last year by the Taliban's reclusive leader, Mullah Mohammed Omar, declaring opium to be un-Islamic.

The first Hadda's farmers knew of it was when a group of black-turbaned soldiers armed with Kalashnikovs turned up in their village. 'The Taliban came here and saw there were poppies. They hit some of the people and told them they would be taken to prison and tortured if they planted more seeds,' farmer Abdul Rashid said.

'Then the elders of the village talked to them and told the Taliban we would destroy the poppies ourselves. It took us four days to do. We used a tractor and cows to plough up the fields.'

In neighbouring villages around the orange-scented town of Jalalabad, and in the fertile Helmand valley, which used to produce half of the country's opium, it is the same story. Driving through southern Afghanistan last week, The Observer found no evidence of poppy cultivation.

The trade last year produced 75 per cent of the world's heroin. It has now vanished. The distinctive plants that grew by the roadside have disappeared. They have been replaced by fields of lush but worthless wheat. 'I used to have one-and-a-half acres planted with poppy. Now we have nothing,' farmer Hussain Gul complained.

'I have to feed a family of 14. Should I buy clothes for my children? Should I feed them? Should I take them to the doctor?' he asked.

Farmer Khan Afzal added: 'I blame the Americans because they promised they would help us. But they didn't. They have given us no assistance.'

In Hadda, last year's opium crop was destroyed by hail. But the previous year Afzal and other smallholders who leased between one and eight acres of land made a profit of around £350 each, a fortune in Afghanistan where the average monthly salary is £3. Since the ban on poppy production was imposed, the price of a kilo of opium has soared from 3,000 Pakistani rupees (£35) to 40,000 (£470), sources say.

To date, this has had no discernible effect on the international heroin market, thanks to massive stockpiles in countries such as Pakistan, Iran and Turkey where the raw opium is refined. Intelligence experts from Britain and America believe the fall in production could lead to a worldwide shortage and price rise, although in reality production in countries such as Burma and Colombia is likely to increase to satisfy demand.

For a few farmers, the Taliban ban has led to even greater wealth - those with stockpiles of dark brown resin hidden in wet plastic bags have seen their income increase. But the ban has caused massive hardship to ordinary Afghans, already left reeling under the burden of war, drought and Soviet occupation. Skilled labourers who would descend on the Helmand valley every spring to harvest the milky-white opium are now jobless.

Faiz Ahmed Faiz, the Taliban's foreign affairs spokesman, yesterday said his Islamic government had completely eradicated poppy cultivation. 'It was an epic task,' he said. 'The response to this tremendous achievement from the international community was unexpected. They imposed more and more sanctions on us.'

The Taliban had begun by reducing opium production by a third, using religious scholars to convince the people. They then totally wiped out 'this menace' two months ago, he added.

The reality is more complex. Hashar, as the crop is known locally, has been growing in Afghanistan for centuries. The farmers of Hadda yesterday said poppies had flourished in their ancient valley for as long as they could remember: since the time of Afghanistan's deposed King Zahir Shah 30 years ago.

But under the Taliban, production increased spectacularly - to the point where Afghanistan became the world's largest opium producer, supplying 80 per cent of Europe's heroin.

The crop was trucked across Pakistan's deserts. It was then taken by boat across the Arabian Sea from the port of Gwadar. It also left the country via Iran, ending up in eastern Turkey, and in convoys through Afghanistan's lawless northern neighbours, Turkmenistan and Tajikistan. The Taliban collected an estimated $20 million in opium taxes.

Late last year, Mullah Omar appears finally to have agreed to Western demands to end opium production. He had hoped for some concessions in return, including diplomatic recognition. Instead, the United Nations imposed more punitive sanctions on Afghanistan in January because of the country's refusal to extradite the alleged Saudi terrorist Osama bin Laden.

The move badly backfired. Mullah Omar responded by destroying Afghanistan's two giant Buddhas, a disaster that many observers believe could have been averted.

Sceptics have questioned whether the Taliban have genuinely eradicated poppy cultivation. But all the evidence suggests they have. 'All the indicators are that they have done it. The prices have increased dramatically,' one informed UN source in Kabul admitted last week.

The UN's Drug Control Programme (UNDCP), meanwhile, which compensated farmers who switched from opium to other crops, was scrapped in December because of a lack of funding from the US and other donors.

Hadda's farmers are now praying for a change in policy - or a change in government. 'We don't have anything,' Rashid lamented yesterday, staring glumly at his green wheat field as rain fell. 'All the young people have gone to Pakistan. Ninety per cent of this area used to be cultivated with poppy. How much money can you make from wheat?'

Of the 3,000 people who had lived in Hadda, only 300 were now left, he added.

Even the trade in looted Buddhist statues had dried up. Between the second and seventh century Hadda was one of the most sacred spots in the Buddhist world, where pilgrims came from across central Asia to venerate a fragment of the Buddha skull and one of his teeth. But the hundreds of crumbling stupas dating from that era had already been ransacked, Rashid explained, by Soviet soldiers and the Mujahideen.

Their contents had been taken across the border to the frontier town of Peshawar. Only the wheat was left and a few goats. 'We are miserable. We have nothing. We have been forgotten by the world,' he said.