The North Otago Irrigation Company wants the council's investment as the cornerstone of a plan to double the scheme's reach to water at least 20,000 hectares of farmland.
A study released earlier this year showed that the scheme had created hundreds of jobs in the region.
The council originally planned to increase its current investment of $12 million by another $9.5 million, but yesterday decided to halve the new loan offer to a maximum of $17 million after public concerns about the amount being lent.
The council said it has also agreed that the interest rate on the irrigation loan will be the one-year swap rate plus 1.25 percent, which is about 1 percent higher than its existing loan.