TasWater estimates Tasmanian businesses who produce trade waste would need to spend $75 million to upgrade their systems to meet state environmental regulations.
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Labor in Parliament on Tuesday criticised Treasurer Peter Gutwein's inaction on the issue which he raised in 2017 and continued to raise during the state election campaign.
The state government has since become a shareholder with council representatives in the water body after an attempted takeover was knocked over last year.
TasWater chairman Stephen Gumley wrote to Labor last month and raised concerns for industrial trade customers, small businesses, their workers and environmental compliance which he said was "an urgent matter in Tasmania".
"It is especially urgent in the industrial red meat, vegetable processing, and dairy businesses who are struggling to meet their trade waste obligations but continue to produce liquid waste at a strength our systems are not designed to handle," he said.
"It is the kind of waste other water utilities in Australia would refuse to accept."
Dr Gumley said these large businesses underpinned employment in regional towns.
"I am concerned that the cost of environmental compliance going forward will place a number of these businesses under significant financial pressure potentially affecting their viability," he said.
Dr Gumley said the recent closure of JBS Australia's Devonport abattoir had increased demand on smaller abattoirs and driven up their waste volumes.
Labor's regional development spokeswoman Anita Dow said Mr Gutwein had abandoned a promise to stop Tasmanian businesses from closing over expensive trade waste issues.
Mr Gutwein said businesses were able to access a no-interest repayment scheme through TasWater to update trade waste systems.
He said the upcoming budget would invest record amounts into the water company.