The Victorian Farmers' Federation (VFF) has set up a fund to fight the plan to water entitlements and affect irrigation projects in the Murray-Darling River Basin.

VFF President Mr. Andrew Broad said today that the Fair Go Fund will be formed to counter the threat of Victorian irrigation entitlements that the recommended plan will be implementing in 2014 and 2019.

In a statement, Mr, Broad said 27 percent to 45 percent of entitlements will be lost from Victorian irrigators if the plan will not be amended.

"This government-imposed 'drought' will inflict permanent damage on rural communities, destroying thousands of jobs and striking at the heart of Australia's food and fibre production," Mr Broad said in a statement on Wednesday.

"The VFF's Fair Go fund has been established to enable the plan to be challenged at every opportunity."

He said the funds would be used "for expert legal and technical advice and research, to highlight the flaws and impacts of the plan on rural people and to support the activities opposing the plan."

"Water cuts in rural communities will affect more than just irrigators - secondary industries such as processors, transport companies and equipment suppliers will all be affected," Mr Broad said.

"If our rural communities collapse small businesses, from the hairdresser to the local store, will also be in the firing line.

"While food shortages in our cities are unlikely, taking water out of agriculture will drive up the price of groceries as well damaging Australia's export capacity."

The planned cutback on irrigation water, which is set more than three years from now intends to save the Murray River, which is now heavily silted and could be lost due to overuse and environmental degradation.