Charging royalties to commercial water bottlers and irrigation scheme users will "open a can of worms" and put many farmers out of business, Federated Farmers says.

Photo: RNZ

Labour leader Jacinda Ardern announced a policy to make commercial water bottlers and irrigation scheme users pay for water, if her party gets into power.

It was only fair consented water users paid up, just as oil and gas companies already did, she said.

However, unlike the Green Party's call for a blanket charge of 10 cents a litre on commercial water firms, Labour said the price tag would be set by local authorities and a panel of experts depending on water quality and scarcity in any particular area.

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"A royalty on the commercial consumption of water will assist with the cost of keeping our water clean.

"The royalty will be flexible to reflect the scarcity or abundance of water in different regions, the different quality of water, and its use.

"Royalty levels will be set following consultation and the revenue will largely be returned to regional councils," Ms Ardern said.

Households and domestic users would not be charged, neither would stock farmers unless they used irrigated water.

Federated Farmers said Labour's policy lacked detail and did little to allay farmers' fears.

About 25 percent of all water consumed in New Zealand was irrigated and farmers could not afford to pay more, Federated Farmers water spokesperson Chris Allen said.

"Is there any more money in the system for farmers to absorb? At the moment there is no more money ... so something will have to give.

"Personally, I think this is opening a can of worms and it has not been thought through enough," Mr Allen said.

Export New Zealand executive director Catherine Beard said inconsistent prices around the country would not work.

It would be better to put in place a water rights trading system, similar to the fishing industry, rather that put a price on water, she said.

Finance Minister Steven Joyce said Labour's water tax lacked clarity and would hit the regions hard.

Jacinda Ardern also announced Labour would scrap the government's $480 million fund to pay for new irrigation schemes and said it encouraged intensive farming.