Crown Irrigation has announced its first investment.
The government irrigation company will invest more than $6 million in stage one of the Central Plains Irrigation Scheme in Canterbury.
Chief executive Murray Gribben said the scheme would irrigate about 60,000 hectares when it was completed.
The first stage of the investment related to the Rakaia River, with a canal being built and running to the Waimakariri River to ensure water would run to stages two and three of the project.
Mr Gribben said Crown Irrigation might also invest in those stages.
The Government set up Crown Irrigation last year with a $400 million budget to get regional irrigation schemes up and running.
The Government believes its involvement in irrigation schemes will attract third-party capital investment to the schemes.
However, the Green Party is calling for the brakes to be put on irrigation schemes in Canterbury due to fears for the health of those living in rural communities.
Rural parents are being warned by Canterbury health authorities to be careful about making infant formula with farm water amid fears babies could be poisoned by the high levels of nitrates in the water.
Green Party water spokesperson Eugenie Sage said there new irrigation schemes planned for the Canterbury region would allow more intensive agriculture - which meant more cows, more urine and more nitrogen leeching into rivers and ground water.
It was time for Environment Canterbury to pay attention to the health warnings, she said.
"What we're seeing now is just the tip of the iceberg. Environment Canterbury's own modelling has shown their will be a significant increase in nitrate nitrogen levels because of past land use activities.
"So we need to actually put the brakes on further intensification if we are to protect our aquifers for safe drinking water," Eugenie Sage says.
Levels will keep rising
Canterbury Medical Officer of Health Alistair Humphrey said nitrate levels in groundwater in many areas of Canterbury groundwater were high - and they were going to keep rising.
"The thing is it's a bit like turning an oil tanker around - your nitrates rise very, very slowly, they take many years to rise. So in order to turn it around, once you get to half, it just keeps going upwards and eventually will exceed the acceptable levels.
"Many of our areas actually already are exceeding acceptable levels but most are already above half and they will keep going up."
Dr Humphrey said he understood the economic logic behind water storage but that the pollution of ground water would also prove costly.
"If our water continues to be contaminated with nitrates, it eventually will become extremely expensive to treat the water. And any benefits we may see will be severely curtailed by high levels of nitrates in our water."
Nitrate contamination was essentially water pollution and was the canary in the mine when it came to water quality, he said.
However, David Caygill, the deputy chair of the commissioners running Environment Canterbury, said it was not sensible a call for the brakes to be put on irrigation isn't sensible.
"We need to recognise this is a long-term issue, it requires action, and action is being taken."
However, it was not sensible to stop irrigating and pass up the economic and social opportunities which flowed from using water more efficiently, he said.