The small Waikato township of Waitoa is losing its long-term access to free water. 

The local Fonterra factory is ending its more than 40-year old arrangement to supply locals water - originally to serve homes affected by factory dust. 

Matamata-Piako District Council is consulting the public on an 8.2-million proposed solution.

Mayor Ash Tanner says Fonterra likely wants to avoid responsibility for anyone getting sick. 

"The problem I think we have in this country is - there's an incident, and then we have a bit of a knee-jerk reaction and then we set up a regulatory body to overlook it and then we go over the top and we make it harder to supply it."

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