Introduced in 1975, these are payments to farmers in those areas where there are natural handicaps. Such areas are known as 'less favoured areas'. They include mountainous areas and areas where there are specific environmental difficulties. In these areas, farmers are in a less favourable competitive position because farming is more costly - for instance, the cost of collecting milk is greater in the hills and mountains than in lowland areas where diary farms are likely to be closer to the dairy and bulk transport of milk by road is cheaper.The purpose of compensatory allowances is to ensure that land remains in farming and that these areas are not de-populated. Compensatory payments are paid to farmers on the condition that they respect the rules of cross-compliance.Compensatory payments form part of the menu available under axis 2 of the rural development programmes and, in keeping with all rural development measures, they are co-financed by the member state. (The other main measures under axis 2 are agri-environmental measures).