ABOUT 20,000 people will have their visa applications cancelled as the Rudd government launches a crackdown in the skilled migration program.

In a move likely to inflame political sensitivities over the treatment of Indian students, the government is expected to deny migrants any opportunity of achieving ''back door'' permanent residency through the skilled migration scheme.

The changes to be unveiled today will see 20,000 current applications binned; an overhaul of the queueing system that identifies occupations in demand and creates a points system; and state governments will be asked to develop new migration plans.

The Immigration Minister will also gain new legal authority to set a maximum number of visas for a single occupation.

The cancelled applications apply to all offshore general skilled migration claims lodged before September 2007. Refunding 20,000 visa applications will cost taxpayers about $14 million.

Given the changes could have a significant impact on many foreign students already in Australia, the government will introduce transitional arrangements to apply until 2012.

Foreign students who have a qualification for an occupation no longer considered in demand will get to apply for a temporary 18-month visa, allowing them to gain work experience.

The 18 months will also give a foreign graduate time in which to find an employer willing to sponsor their application as a skilled migrant.

If they are unsuccessful in that attempt, they will have to return to their country of origin.

The overhaul of the system will set a new list of occupations in demand.

The new system is expected to favour skilled workers including nurses, general medical practitioners, mechanical engineers and teachers instead of groups such as cooks and hairdressers.

Employers are supportive. Yesterday, Australian Industry Group chief executive Heather Ridout said: ''The changes should result in a better connect between permanent residency and addressing Australia's critical skills needs.''

In a frank speech to be delivered this morning, Immigration Minister Chris Evans will argue that the skilled migration program has not been working in Australia's economic or demographic interests.

''The program has been delivering self-nominated migrants from a narrow range of occupations with poor to moderate English language skills who struggle to find employment in their nominated occupation,'' Senator Evans will argue.

Senator Evans will acknowledge the impact of the changes on foreign students, but argue they can still gain residency if they gain qualifications in professions that are in demand.

He said the current tensions and misunderstandings have been made worse by unscrupulous migration agents.

''[These agents] have been misleading many international students into believing that a course in Australia gave them an automatic entitlement to permanent residence,'' Senator Evans said. ''It does not, and it will not.''

Senator Evans will also argue that the government supports skilled migration and continues to want migrants, ''be they from India, the United Kingdom or China - our three largest source countries or elsewhere''.

''We want skilled migrants on terms that work both for Australia and for the migrants themselves. We need a program with integrity and direction.''