Irrigators in NSW say their communities and agricultural productivity will suffer if high environmental water recovery targets are pursued.

A coalition of farming groups have commissioned environmental consultancy RMCG to look at the socio-economic impact of the Murray-Darling Basin Plan on Murray communities.

It found that 28 per cent of the Murray Valley's general security water entitlement is being held by governments for environmental purposes, which represents an effective $120 million loss of production on Murray farms each year.

This report released this week is one of four studies into the specific impact of environmental water recovery on particular communities and local economies, including job losses.

Murray Irrigation Ltd (MIL) chief Michael Renehan says a third of MIL's water had been removed from agriculture.

“That has had a significant impact on the viability and the vitality of our region,” he said.

“What we're seeing is hardship at every level.”

RMCG found annual crop production declined about 30 per cent under the plan, while dairy production was down 21 per cent.

But RMCG did not separate the impact of the Basin Plan from the effect of other major economic and environmental factors.

For example, rice production is under pressure from alternative crops such as cotton, which carries a better return per megalitre of water for farmers.

Additionally, the dairy industry is in crisis partly due to major processors Murray Goulburn and Fonterra slashing farm gate milk prices, which has pushed hundreds of farmers into debt.

Future RMCG studies are set to look at the socio-economic impact of the Basin Plan separately from other factors.

Water ministers from the Commonwealth and Basin are currently considering plans for major infrastructure works to return water to the environment more efficiently.