BEIJING, July 8 (Reuters) - China's Inner Mongolia region plans to speed up resettlement of nomads from their traditional grasslands to fixed homes in towns, as part of a conservation programme, a top official said on Thursday.

The government will also increase payouts to herders who settle down, said Liu Xinle, deputy governor of the northwestern region. Inner Mongolia is fighting severe desertification blamed in large part on over-grazing of the rolling steppes.

"We will step up our conservation efforts," Liu told a news conference on government plans to boost development in poorer western parts of China.

"We aim to gradually achieve the natural regeneration of the environment on the grasslands through moving people to urban areas, moving animals to designated grazing areas, and moving industry and business into industrial zones," he added.

The government will use more interventionist methods in areas where natural regeneration is a challenge, he added.

Opponents of the government's plans say herders who have grazed the grasslands for centuries are key to solving the problem, and should not be blamed for spreading deserts.

Studies by Nobel prize winning economist Elinor Ostrom showed that when China imposed agricultural collectives on grassland areas that were formerly home to nomadic peoples who moved herds with the seasons, they became degraded.

Privatisation in the decades since China decided to follow a path of "reform and opening up" caused further damage.

China says it is improving environmental stewardship constantly and massive changes in society and living standards mean many Mongolian nomads need to settle down.

Over a quarter of China's land area was covered by desert in 2007, and a nationwide survey published the next year found that serious erosion is scouring over a third of the country, putting its crops and water supply at risk.

"We will put in place conservation compensation mechanisms, and intensify permanent and temporary bans on grazing," Liu said.

Rights groups claim the government has failed to provide Mongolian herders with suitable means of living after moving them to settled homes. Liu said the government would boost payouts.

"We will also increase the scale of subsidies to herders in the areas of the (grazing restriction) programmes, and extend the time-frame for the issuance of such subsidies." (Editing by Jeremy Laurence)