Householders will have to pay an annual charge of up to €175 for their water within two years, the Irish Independent has learned.
The move comes as the Government was forced to admit it will not meet a target to have meters installed in every home in the country by next year. It will, instead, introduce a flat-rate annual fee - expected to be €175 per house, regardless of household income.
The U-turn by Fine Gael comes after pre-election promises that it would not charge for water until every home had a meter installed to measure consumption.
As part of the EU/IMF bailout conditions, the State is required to start charging for domestic water by 2012/2013. Sources said the Government was "locked in" to this provision, regardless of whether meters were in place.
Work on the metering programme - which, the Government says, will take four years to complete - has not yet begun. The project will be funded by the National Pension Reserve Fund. The Government hopes to start installing meters next year.
"At some stage, there's going to be flat-rate charges," a senior government source told the Irish Independent. "No decision has been taken on how we're going to marry the programme for government with the EU/IMF deal, but we're absolutely locked into this deal."
Ireland is one of the only countries in the EU not to charge households for water. The State spends more than €500m a year treating water for domestic use, something the EU/IMF insists must change.
However, the Government will likely face stiff opposition to get a charging system in place. The charge cannot be considered an environmental tax aimed at encouraging conservation if consumption cannot be measured.
If a household of two people has to pay the same as a household of six, there would be no incentive to reduce use.
If the flat rate was imposed on each of the country's 1.4 million households, around €245m a year would be collected.
The Government wants to set up a national authority to take responsibility for the water network and impose charges,.
Details of the plan must be finalised for the EU/IMF by the end of this year. A soon-to-be commissioned study will set out the state of the country's water network, examine how much water is being lost and what works are needed to bring it up to standard.
Junior Environment Minister Fergus O'Dowd would not comment on water charging, saying it was a matter for the Department of the Environment. However, he admitted the country's water system was in a "critical way".
"We need to spend €5bn over the next 10 years to stop leakages, with €250m needed immediately," he told the Irish Independent.
However, collecting the domestic charges could prove difficult, given the experience in the commercial sector. In some areas, as few as 27pc of businesses pay their bills and councils are currently owed €90m.
The Irish Independent