A Wairarapa irrigation system which didn't stack up economically still got taxpayer cash from the Ministry for Primary Industries, says a damning study commissioned by Fish & Game.
But MPI is standing by its decision and says the report is flawed.
Fish & Game has released an independent analysis of the Wairarapa Water scheme's successful application for $821,500 from MPI's Irrigation Acceleration Fund for stage 2 of the scheme, which aims to irrigate 30,000ha.
The 2014 application was based on a long run farmgate milk price of $7.07 per kg of milksolids, which was questionable, and that 55 percent of the irrigated land would quickly be converted to dairy, says author Peter Fraser, of Ropere Consulting.
It also failed to include any water pricing data, which was a "major omission".
At current dairy prices the entire proposal quickly unravelled and the promised 1110 jobs "become vapourware", Mr Fraser said.
He also doubted whether three dams could be built over two sites and 100km of pipes for just $253 million.
Mr Fraser was scathing of MPI's role in granting the funding.
"It beggars belief that in the context of a substantial, prolonged and well document downturn in the dairy industry; the Government's primary agricultural adviser apparently failed to question an application based on substantial land use change to intensive dairying."
Fish & Game says Wairarapa ratepayers, who are also contributing to the scheme, are being misled and it raises questions about MPI's degree of scrutiny of other schemes.
However, in a statement, Wairarapa Water project director Michael Bassett-Foss shot back that Mr Fraser's report also used outdated information.
He said a more recent report showed dairy farms would actually reduce over time and people would move into horticulture, sheep dairy and arable crops. The Wairarapa's three councils were being kept up to date as new information came to hand.
"It is disappointing that neither Peter Fraser nor Wellington Fish & Game bothered to come to us to get their fact s straight," he said.
MPI is standing by its decision and also criticised Mr Fraser's figures.
"The premises within Peter Fraser's analysis are flawed, and based on old information," said the ministry's Ben Dalton in a statement.
MPI had a robust assessment of funding applications and milk price was only one part of the wider economic assessment of the benefits of an irrigation project, he said.
Mr Dalton also referred to the latest analysis of the project - which says there will be a short-term increase in dairying before it drops to 29 percent of the scheme.
The money was not paid up front, Mr Dalton said, but on completion of contracted work and when it meets expectations.