The Government says it would be willing to invest up to $400 million on commercial terms with private investors and councils to fast-track regional irrigation schemes across the country and lift economic growth.
Next week's Budget will allocate $35 million over five years for councils to develop feasibility studies of such schemes to get them to an investment-ready prospectus stage.
The announcement of a new type of public private partnership was made yesterday by Agriculture Minister David Carter at the post-cabinet press conference.
At the same time, Environment Minister Nick Smith outlined a contestable fund of $7.5 million a year for the next two years to improve water quality, which amounts to over $250 million over 30 years.
Dr Smith also released a national policy statement on freshwater management under the Resource Management Act. It requires every council to set their own limits on the quality and quantity of water that can be taken.
Prime Minister John Key said the statement ensured there would be "environmental bottom lines."
He said the Government was committed to making the most of the economic growth opportunities that New Zealand's water presented while ensuring the environment was protected.
The announcements are the first part of the Government's response to the Land and Water Forum report last year, a report of 58 competing interest groups that set out options for future freshwater management.
Governance arrangements will be finalised in February next year, including the role of iwi in ongoing freshwater management.
Yesterday's package has been criticised by Labour, the Greens and environmental interest groups as leaning too heavily on the side of rapid development and land intensification that would lead to worsening water quality in lakes and rivers.
Mr Carter said that once irrigation investment proposals had been prepared, with funding from the irrigation acceleration fund, the cabinet would consider them on a case-by-case basis for potential investment.
He said any equity stake the Government took in an irrigation scheme would be as a minority shareholder, perhaps a quarter or a third.
The actual investment vehicle was yet to be decided but it was likely to be available from 2013 - 14.
Mr Carter quoted research by NZIER suggesting that 340,000ha of new irrigation could be supported by the fund, boosting exports by $1.4 billion a year by 2018 and $4 billion a year by 2026.
He said that significant schemes were already being developed including in Hawkes Bay, Wairarapa, Canterbury and Otago and the acceleration fund would help get them to the stage where they could be professionally presented as investment opportunities.
"This is a means of showing to investors while at this stage we are dealing with an immature investment class, Government will be there as a cornerstone shareholder."
Dr Smith said the clean-up fund would be available only to councils that have effective anti-pollution rules in place and it increased by seven times the amount already allocated to such bodies as Lake Taupo, the Rotorua Lakes and the Waikato River.
Dr Smith said the national policy statement - which sets directions, not rules for councils - would impact on all decisions on policies, plans and individual resource consents by councils and the Environment Court affecting freshwater.