This article questions the effectiveness and viability of Tax to Fee reform (Fee Gai Shui) on water resources and agriculture production. The Fee Gai Shui reform has been heralded as a possible solution for reducing the excessive fiscal burden on peasants. While the reform may achieve in relieving peasant' burden up to 30%, the initial impact of Fee Gai Shui on water resources and agricultural production indicate least satisfactory trends. The policy show profound effect on rice yield and area. It might also have profound effect on cropping pattern but it has yet to be seen. Dependence on local water resources show significant increase after Fei Shui as it discouraged farmers to rely on regional water sources. Although the lower regional water use under Fei Gai Shui reduced the volumetric water fees paid by farmers, the savings were mostly offset by increasing pumping costs in accessing water from ponds. Without any adjustments, the Fei Gai Shui is likely to cause serious predicament in agricultural sector. It is visioned that local water resources such as water ponds will continue to play a more important role in sustaining agricultural production.