Australian Prime Minister John Howard has announced a A$10bn ($7bn) package to tackle the country's water problems, as it faces a sixth year of drought.
Australia is suffering its worst drought on record
Mr Howard said water security was the country's biggest challenge and the federal government wanted to take over the Murray-Darling river system.
The state governments of Queensland, New South Wales, South Australia and Victoria share its management now.
The idea, coming in an election year, could spark a political row.
Mr Howard's critics says he looking for ways to improve his image on the environment, where he is best known as one of the few developed world leaders to have refused to sign the Kyoto protocol on climate change.
Mr Howard addressed the issue in a speech on the eve of Australia Day.
"I regard myself as a climate-change realist. That means looking at the evidence as it emerges and responding with policies that preserve Australia's competitiveness and play to her strengths," he said.
The BBC's Nick Bryant, in Sydney, says the Murray-Darling river system is the country's most precious water resource and provides supplies for most of Australia's irrigated farm land.
The four state governments which manage it are controlled by the opposition Labor party, which has argued that the new proposals represent an unacceptable power grab by the prime minister.
Mr Howard wants the federal government to take over, in what would be the biggest reform of water management in the country's history.
He believes that the present system of management is overly bureaucratic, a problem highlighted by the severe drought - the worst on record.
"This is our great opportunity to fix a great national problem," he said. "It can only be solved if we surmount our parochial differences," he said.
The Murray-Darling takeover would cost A$3bn. Mr Howard's plan also envisages spending $6bn on modernising irrigation infrastructure and A$1.5bn on water saving for farmers.
The plan is the second indication in a week that Mr Howard is putting the environment at the centre of his re-election campaign.
On Tuesday he announced a new environment minister, Malcolm Turnbull, a former merchant banker best known for his failed attempt to make Australia a republic in a 1999 referendum.
Mr Howard is expected to call an election in the second half of the year, and his coalition currently trails Labor in opinion polls.