By ELIZABETH BUIE

Environment Correspondent

FARMLAND surrounding a water borehole in the Balmalcolm area of Fife is to be the first part of Scotland to be designated a Nitrate Vulnerable Zone under European legislation designed to protect drinking water from environmental damage caused by nitrate-based fertilisers used in agriculture.

The Scottish Office has decided not to designate the other proposed NVZ, the catchment of the River Ythan in Grampian, despite widely-held assumptions that the estuary's problems of severe algae growth are linked to increased nitrate use by farmers.

Lord Lindsay, Scottish Office Environment Minister, said that despite monitoring in the area for 25 years, scientists were still unable to prove a causal link. Under the strict criteria laid down in the EU Nitrates Directive, scientists were unable to provide evidence of that link.

``This is not a borderline decision. The science is either there or it is not,'' said Lord Lindsay. He said that without such scientific proof, the Government could be accused of acting outwith its powers if it is designated an area with insufficient evidence.

``Scientists are not convinced that there is a link, but we realise that there is a problem and there is eutrophication and we are going to press on with our commitment to scientific research there,'' he said.

The Scottish Office will carry out a further review of the Ythan area before December 1997 and intends to promote good practice in the use of nitrates by farmers throughout the Ythan catchment in line with its code of good practice, Prevention of Environmental Polution from Agricultural Activity.

David Jack, cereals convener with the National Farmers' Union of Scotland, whose farm would have been included had the Ythan designation gone ahead, said: ``This is a sensible decision. I think farmers will recognise two things - that the relationship between cause and effect has not been established and we will need a lot more scientific work before it becomes established, and that the sensible way forward in the meantime is that farmers should wherever possible put good husbandry practice in place in line with the code.''

He said that had the designation been made, it would have caused a great deal of uncertainty about the capital value of farms within the catchment area and might have caused some farmers to carry out a revision of their farming enterprise at considerable financial cost.

Once the Balmalcolm area of Fife - nine farms covering 425 hectares - is designated in parliament, it will become mandatory that farmers in the area follow an action programme on their use of nitrates in farming and other practices. Failure to comply will lead to penalties, which will be set out when the regulations go before parliament.

Ms Rebecca Badger, agricultural policy officer with the RSPB, said the organisation was disappointed that the Ythan was not being designated this time, but hoped it would be after further research.

``This is a very important bird area and these algal blooms are unnatural and are potentially detrimental to the bird population,'' she said.