After years of fruitless efforts to discourage this country's rapidly growing illegal production of coca leaves -- far and away Peru's largest export crop -- U.S. narcotics and aid officials here are proposing a massive and costly program to destroy the coca plants in the valley where much of the crop is grown.

With a total proposed U.S. funding of about $70 million, made up mostly of Agency for International Development (AID) loans and grants from the State Department's Bureau of International Narcotics Matters, the plan is an ambitious proposal to rid Peru's upper Huallaga Valley of the nation's most profitable cash crop. In place of the coca plants, which provide the raw material from which cocaine is made, the program would substitute less profitable but legal crops, such as rice and oil palms.

Drug authorities estimate that Peru, believed to be the world's largest producer of coca leaves, grows an annual coca crop of 50,000 tons. Of that crop, 14,000 tons is used for legal purposes, including the manufacture of pharmaceuticals and the leaves traditionally chewed by Peruvian highland Indians. That leaves about 36,000 tons per year of leaves that are grown in violation of Peruvian law, refined into coca paste and smuggled into Colombia for the chemical treatment that transforms the paste into cocaine.

"Out of that 36,000 tons, about half . . . is coming out of the Huallaga Valley," said Larry Thompson, head of the U.S. Narcotics Assistance Unit in Peru. "The idea of the upper Huallaga program is essentially to replace coca with economically viable alternative crops."

The upper Huallaga, which runs through the north central portion of what Peruvians call the "eyebrow of the jungle," is a particularly rich swath of land that was opened to farming during the 1960s, after a good road network was built. Within 10 years, the newly developed area's coca crop was one of the largest and healthiest in the world.

U.S. officials say this is because the now-defunct Peruvian military government abandoned the region and concentrated instead on development of agriculture on the coast. Whatever the reason, the upper Huallaga Valley city of Tingo Maria has become such a flourishing center for the coca trade that it is occasionally referred to as "Snow City." As of spring 1980, Tingo Maria -- population about 35,000 -- had three car dealerships, 10 hotels and appliance stores that were doing a lively business in television sets even though the area had no television transmission.

Although the coca eradiction program has received little publicity in Peru, the Peruvian government has pledged its support, its police services, and 25 percent of the total $167 million funding. As proposed for a financing request this month in Washington, the funding would include $50 million in AID development loans, $2.6 million in AID grant money from the Bureau of International Narcotics Matters, $42 million from the Peruvian government and $54 million form "other sources," which Thompson said might include such lending institutions as the Inter-American Development Bank.

In Washington, a memorandum prepared last December for Rep. Clarence D. Long (D-Md.) raised a number of objections to the program, many reportedly coming from within AID itself. The plan, the memorandum said, was overpriced, ecologically questionable, of dubious effectiveness and a troubling use of what is proposed to be the largest allocation for a single aid program in all of Latin America and the Caribbean.

"Given the lack of concrete justification for the proposed development activites, in addition to the almost total absence of any discussion of benefits to be received by the subject population (despite the extremely high project cost per family of $5,500)," read the memorandum, "it appears that development funds in this case are being used more as a financial incentive to the government of Peru to step up drug control efforts in the upper Huallaga Valley, than to meet basic human needs."

U.S. Ambassador Edwin Corr, whose past appointments have included a diplomatic post in Mexico and the position of deputy assistant secretary for narcotics matters at the State Department, vigorously defended the upper Huallaga project in a recent interview.

"The project has gotten more attention in its development, and is getting greater scrutiny review than most development projects," he said. "I don't think anyone should be ashamed or overly sensitive about the fact that is you have an illicit crop, and it's doing harm to people, that you're going to stop them from growing it."

According to an AID project description, the program would begin with an extensive survey of the upper Huallaga, including topographic mapping and aerial photography. During this effort to determine with some precision where the coca is planted, local officials would begin what the program calls "voluntary eradication" -- a grace period during which farmers would be provided with herbicide and a sprayer to destroy their coca crops.

Their farms would then be inspected and certified coca-free, and these certificates, with regular revalidations, would have to be presented each time the farmers applied for agricultural credit or technical assistance.

The project description acknowledges that this would not get rid of very much coca, but the program's next phase would be compulsory eradication.

"Mobile inspection teams will be formed and undertake a systmatic inspection-eradication activity throughout the area," the description reads. "The teams, composed of from five to 10 men, accompanied by the Civil Guard will visit each parcel with coca that has not been eradicted in the voluntary program and proceed to spray each plant with an approved herbicide. These teams will move in an organized fashion through their assigned areas until all the coca has been eliminated."

Since the bushy coca plant grows best along the poor soils of the steep valley slopes, which are not much good for anything else, the bare ex-coca patches would be returned to forest cover, with steady policing to see that the area stayed coca-free. Along the valley floor, where the soils are quite good and much of the land has been ignored as coca production flourished, the program would help straighted out land titles and then give the farmers agricultural credit, temporary shelters for grain and vegetable storage, farm-to-market roads and technical help.

"Peru is losing out on a lot of production" because of coca, said a Lima-based AID official who asked that his name not be published. "It diverts capital, entrepreneurial skills, and labor away from other agricultural pursuits . . . . We're in the food-producing business . . . .That's an area that can produce a large amount of food."

The essential problem, which everyone acknowledges, is that from the perspective of the small Peruvian farmer, coca is an exceedingly attractive crop. It flourishes on soils that will accommodate nothing else; it requires no fertilizer; it returnes a profit that no other agricultural product can match; and, unlike most crops, it usually promises a steady supply of purchasers and credit -- the narcotics traffickers.

Indeed, as the memorandum to Long pointed out, Peru's poverty and economic development problems are so intense that despite the unwelcome presence of the drug traffickers and a growing concern over drug use among Peruvian youth, some Peruvians see the coca crop as a much-needed safety valve for the struggling rural poor. And the market, the vast majority of it in the United States, is not about to go away.

"I see no solution that is not violent," said Marc Dourjeanni, head of the forestry department at the Lima Agricultural University called La Molina. "It's impossible to find profitable substitutes, because nothing is as profitable as coca . . . You can't go to a campesino [peasant] and say, 'Oday, senor , kill your coca. We're going to grow beans here, or papaya.' The only way to do it is violently, with military repression."

"They're not going to get the income as it was in the old days," countered Thompson. "You've got to have a strong, mobile police force in the valley enforcing the laws against narcotics traffic . . . There's not going to be a single nickel of AID money going to police."

An additional issue raised by the AID documents is the program's potential impact on Peru's highland Indians who for centuries have chewed coca leaves for stimulation and relief from hunger and fatigue.

"This proposed project will reduce the availability of coca to the traditional Indian users," read an AID initial environmental examination. "Political impact will be high." Although recommending further inquiry into the program's possible environmental effects, which the examination said would be "significant," this initial report agreed that the project should preceed.