Water Minister, Senator Penny Wong, said the new Private Irrigation Infrastructure Operators Program for NSW will fund irrigation system modernisation projects, providing opportunities for both off-farm and on-farm water efficiency upgrades.

"This $650m investment will not only help to upgrade and modernise private irrigation systems in New South Wales, it will also secure a share of the water saved for the stressed rivers and wetlands of the Murray-Darling Basin," Senator Wong said.

"By investing now in both irrigation efficiency and water purchase, Water for the Future is helping smooth the transition for irrigation communities to new, lower limits on water use that we all anticipate under the Basin Plan.

"We recognise that the role of private irrigation operators in NSW is crucial to the future prosperity of NSW’s irrigation communities.

"This $650 million program provides them with the assistance they need to implement their modernisation plans and improve irrigation water use efficiency and productivity."

Private irrigation infrastructure operators who operate in the NSW Murray-Darling Basin have been invited to submit funding applications to the Federal Government.

The announcement was immediately welcomed this afternoon by the National Farmers' Federation, which says the investment will provide an "important kick-along" for the state's farmers, irrigators, regional communities and the environment.

"The NFF has insisted the Federal Government improve the balance between water buy-backs and infrastructure upgrades under its water plan," NFF president David Crombie said.

"The pre-eminent focus on water buy-backs had seen farmers' support for water reform in Australia seriously undermined.

"Today's announcement starts to get the balance back into some semblance of equilibrium. It gives farmers some confidence to invest in water-saving measures on-farm and across regions."

Mr Crombie said irrigators now have a choice between selling back their water entitlements or co-investing with government in water-saving technologies on farm,or a combination of both.

"To date, irrigators have only really had the sale of their water as a sole option," he said.