By Omer Farooq BBC correspondent in Hyderabad

Mr Reddy has already announced a package of free electricity

The package of 150,000 rupees ($3,300) for each affected family was announced by Chief Minister YS Rajashekhar Reddy.

Mr Reddy said nearly 3,000 farmers in the southern state had committed suicide over the past six years.

In elections this month, Mr Reddy beat Chandrababu Naidu whom Congress accused of ignoring the needs of the poor.

Help line

The announcement comes amid an alarming increase in incidents of suicide.

Four farmers have committed suicide since the new government took charge last Friday.

Congress accused Chandrababu Naidu of ignoring the poor

The package will cover families of all the farmers who have committed suicide since 1999.

A total of 50,000 rupees will be provided for the one-time settlement of debts and another 100,000 will be given for the economic rehabilitation of the family.

The package follows another new measure announced by Mr Reddy - the free supply of electricity to small farmers and poor families.

Mr Reddy expressed concern about the new cases of suicide.

The chief minister has directed all senior district officials to open a help line to enable any farmer in distress to immediately contact the government to seek help.

The government will arrange counselling and other assistance to farmers who find themselves in difficulties.

Mr Reddy also appealed to all political parties to use every forum to urge farmers not to resort to suicide.

Congress came to power after crushing Mr Naidu's Telugu Desam Party.

Mr Naidu was regarded as an IT guru who turned the state capital, Hyderabad, into a cyber centre.