Under the draft law, executives could be fined up to half their annual salary for water pollution incidents caused by their companies, Xinhua said. Currently, individuals can only be disciplined for such incidents.

The law would also ease the upper limits on penalties against companies responsible for water pollution, holding them responsible for 30 percent of direct losses from "serious" incidents and for 20 percent of the cost of incidents with "medium consequences", Xinhua said without elaborating.

Under existing law, the State Environmental Protection Administration (SEPA) may fine water polluters a maximum of 1 million yuan ($140,000), seen as a major impediment to clamping down on them.

"The fine should be made heftier, especially on those who repeatedly violate the environment rules," Xinhua quoted Hou Yibin, a deputy to the NPC's Standing Committee, as saying.

POLLUTERS' TAX BREAKS

The draft law coincides with a call by the environmental watchdog for an end to tax breaks enjoyed by exporters of 39 products that it said are a danger to the environment.

The items, including pesticides and batteries, currently benefit from value-added tax rebates ranging from 5 percent to 13 percent when they are exported. Blacklisting the products would protect public health and be a tangible step towards honouring China's international commitments to safeguard the environment, Pan Yue, deputy head of SEPA, said on the agency's Web site, www.sepa.gov.cn.

SEPA has listed 141 products as "highly polluting and environmentally dangerous", and Pan said more would be added to the list, which would serve as a reference for future trade and taxation policies.

SEPA, a relatively weak agency, is trying to broaden its influence by enlisting other arms of the government to give economic and financial policies a green hue.

Pan on Monday unveiled a "green securities" campaign requiring companies to meet environmental protection criteria if they want to sell shares to the public.

The latest initiative would require the cooperation of the finance and commerce ministries as well as the customs and taxation administrations.

The banking regulator said on Tuesday that long-term loans to highly polluting sectors, including petrochemicals, steel, non-ferrous metals and power, totalled 1.7 trillion yuan ($237.4 billion) at the end of 2007, an increase of 17.2 percent from a year earlier.

That was faster than the 16.1 percent increase in overall yuan-denominated loans in 2007. But the regulator said banks had made significant strides because loans to polluting industries had grown 30.8 percent in 2006.