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The fund, which will start taking applications for grants from June, comes after the country's biggest supermarket, Tesco, has introduced aeroplane labels on all fresh produce flown to Britain to alert consumers to air pollution. Much of the produce comes from developing countries such as Kenya or Ghana.

Tesco says that British consumers want to know if a food product has been produced locally or flown in from abroad to reduce 'food miles', a term that refers to the pollution caused by transporting food products long distances.

Air cargo is said by some experts to produce a disproportionately high level of carbon dioxide emissions per volume weight of product when compared with shipping or trucking goods to stores.

But while the UK's Department of Farming and Rural Affairs (DEFRA) has put the food industry under pressure to reduce its environmental impact, the government has repeatedly warned of the risks of avoiding produce supplied by developing nations.

In an earlier speech last year, Thomas commented on air-freight labels used by Tesco and Marks & Spencer. "Air-freight labels don't tell us about the full impact of producing and delivering all of the products that we might buy. And if fresh fruit and vegetable exports are helping to end poverty, shouldn't shoppers know about that as well?"

A spokesman at Tesco said today there were no plans to change the air-freight labels. "We're probably going to be extending environmental labeling rather than reducing it."

Others in the food industry are also still concerned about the impact of importing fresh produce from abroad. The UK's Soil Association, the leading organic certification body, will require all suppliers using air freight to meet stringent standards on ethical sourcing and other criteria to counter the negative effects of the air pollution.

The new Food and Retail Challenge Fund is intended to pilot new ways of buying produce from developing countries through projects with poor farmers. It will also communicate information to consumers, via partners, about how their purchases can help poor farmers. Retailers who get funding for new partnerships will be expected to match fund these projects.

DFID also recently announced a £1.2 million grant over two years to support the development of Fairtrade labelling.