The Waitaki District Council's Otekaieke water race looks set to transfer into private hands.
The council's assets committee this week recommended to the full council the 10km race, which supplies about 20 people with irrigation and stock water, be transferred to the Otekaieke Water Company Ltd.
The final decision will be made by the council on April 14.
The transfer would be subject to conditions, including a binding referendum, paid for by the company, which would need at least 50% support for the proposal to succeed.
The company wants to develop the scheme, which takes water from the Otekaieke River.
The first 2.5km would be retained as open race, a new dam built and a reticulated piped scheme built for the remaining 7.5km.
Small property owners will continue to receive water, but three larger farmers want to use it for irrigation.
Water company representative Nathan Tompkins told the committee the race was "a bit of a problematic asset" for the council.
It was an inefficient use of water and had a limited life.
Improvements planned would benefit all consumers, he said.
Discussions had been held with consumers and, where needed, mitigation plans provided.
