Not all farmers will be captured by the policy because the royalty will vary according to water quality, scarcity and what it is being used for. The highest charge will be for bottled water taken from pristine aquifers for export.
Horticulture Hawke's Bay president Lesley Wilson said while she needed to look at the details to see how it affected growers, "the implicit assumption that it is irrigators that are causing issues with water quality and quantity is flawed".
Her concern was echoed by Federated Farmers Hawke's Bay president Will Foley, who said it would place more costs onto farmers, meaning the consumer would have to pay more.
Federated Farmers national water spokesperson Chris Allen said his federation remained opposed to any royalty on irrigation water, especially when it was unclear what purpose it would serve, other than adding another tax.
"At least Labour appears now to be proceeding with caution, recognising the considerable risks. They've promised that if they are part of a new government, deciding the levels of any royalty on commercial use of water will be preceded by consultation."
Mr Allen said a royalty figure of 10 cents a litre that some had "bandied about" would bankrupt farmers and cripple NZ's export competitiveness and regional economies.
Even one thousandth of that figure would be "eye-watering" given the volume of consumptive water use, he said.
Tax reform lobby group the Taxpayer's Union said even a small royalty would have a substantial impact on grocery bills.
"Our initial calculations, based on a half-cent per litre charge on irrigators, is a $28 increase per household in the cost of food," said Executive Director Jordan Williams.
He said some commentators had speculated the charge could be as high as one cent per litre, which would be the equivalent of $56 cost increase per week, per household."
"Yesterday, Federated Farmers said this tax could cripple regional economies. They appear to be right. But the policy will hit low-income families struggling to afford fruit and vegetables the most."
"You can't on the one hand say you want to help the poor, while at the same time piling on a tax that will be felt by every family at the checkout."
ACT Leader David Seymour said the proposed water charges would be punitive for farmers, and criticised the current National government for being weak on water.
"National could have pre-empted Labour's announcement with a water policy that protected both the environment and farmers. Instead, their complacency has led to farmers being threatened with punitive, politically-determined charges that will flow on to consumers too."
Primary industry organisations have also widely panned Labour's 'water tax', including Irrigation New Zealand.
Chair Nicky Hyslop told a meeting in Dunedin that New Zealand had a "huge amount" of water, and the tax was not needed.
"It's just getting it [the water] to the right place at the right time and meeting a whole lot of expectations," she says.
