The Government has begun winding down public subsidies for large-scale irrigation projects, but has agreed to honour previous commitments to existing schemes and three that are still in the works.

Finance Minister Grant Robertson said the wind-down - signalled in the Government's confidence and supply agreement - came after a review into how to tail off funding through Crown Irrigation Investments Limited (CIIL), while honouring existing commitments.

"The decisions will provide certainty to the individual schemes which had applied for Government funding alongside private investment."

All existing CIIL commitments for development contracts would be honoured to the close of the current phase of each contract.


Three schemes would also be funded for their construction phases because of their advanced status, subject to meeting the normal requirements of the fund.

Those commitments were for the completion of the $200m Central Plains Water Stage 2 (CPW2) in Canterbury, and constructing the Kurow-Duntroon scheme in South Canterbury and the Waimea Community Dam in the Nelson region.

CIIL was contractually bound to honour its $65m loan to CPW2, due to be complete by August.

It had also signed a construction funding term sheet with the Kurow Duntroon scheme, which served a mix of dairy, sheep and beef, viticulture and other sectors.

CIIL had committed $35m towards the Waimea scheme, which was mainly targeted at the horticulture and viticulture sectors in the Nelson region, and would increase minimum flows in the Waimea River.

Robertson said the wind-down represented a shift in priorities to the previous government.

"Large-scale private irrigation schemes should be economically viable on their own, without requiring significant public financing," he said.

"We must also be mindful of the potential for large-scale irrigation to lead to intensive farming practices, which may contribute to adverse environmental outcomes."


Robertson said funding for the three projects still in development could be met with the current appropriations, should Waimea and Kurow Duntroon reach financial close within their allowed timeframes.

"I recognise that this decision will be disappointing for proponents of projects that won't be considered or progressed," he said.

"However, a decision had to be taken on how to put into practice the agreements made on formation of the Government."

Smaller-scale, locally run and "environmentally sustainable" water storage projects could be considered on a case-by-case basis through the Provincial Growth Fund, Robertson said.

Irrigation NZ chief executive Andrew Curtis said his group was disappointed that some other schemes on the books would miss out.

They included the Hurunui Water Project and the Hunter Downs Irrigation Scheme, both in Canterbury.

"Some of the statements the minister has made don't make sense - particularly because Hunter Downs and the Hurunui Water Project had both been shown to be environmentally sustainable," Curtis said.

The Hurunui project in particular was being designed to help with resilience, in an area affected by drought.

"One of the biggest things we don't understand is that when you look at the briefings to incoming ministers, what was provided showed all of those schemes on the books were creating an additional $1.2b for New Zealand, in terms of regional economies and resilience," Curtis said.

"The only light at the end of the tunnel is potentially they could apply to the Provincial Growth Fund."

National's agriculture spokesperson Nathan Guy said the move was "a huge blow to regional New Zealand".

"This summer alone saw six regions declared in drought as dry weather hammered primary producers right around New Zealand," he said.

"These irrigation projects would have given them the certainty they could deal with future dry spells but that certainty's now been ripped away."

Greenpeace, which had campaigned to end irrigation subsidies, hailed the shift as "a huge win for our rivers".

"New Zealand is in the middle of a national freshwater crisis. There are already too many cows for our rivers to cope with," its sustainable agriculture spokesperson Gen Toop said.

"The new Government has listened to the people and made the right decision to cut public funding to destructive big irrigation."

"What the world needs more than ever is a shift to regenerative farming to provide food and nutrition into the future without destroying our rivers and our climate.

"We hope to see the new Government invest in this shift."