Organisers of popular music festivals are considering pulling out of NSW due to concerns over the Berejiklian government's plan to reinstate a controversial licensing regime.
The Australian Festival Association is worried about the "punitive effect" legislation could have on the live music industry in the state.
Premier Gladys Berejiklian is again seeking a requirement for high-risk festivals to prepare safety management plans after the drug-related deaths of five young people at NSW music festivals between September 2018 and January 2019.
The controversial scheme was disallowed in the upper house last month when Labor, the Greens and the Shooters joined forces to defeat the government.
A new Musical Festivals Bill 2019 was introduced to the lower house last week by Customer Service Minister Victor Dominello.
Greens MP Tamara Smith said festival organisers "just want to be consulted" by the government.
The Australian Festival Association, Live Performance Australia and APRA AMCOS met Mr Dominello on Monday, but said while the government had committed to further consultation, it had stopped short of agreeing to establish a roundtable.
In a joint statement, released by the AFA on Tuesday, festival organisers cast doubt on the future of the industry in NSW.
"Uncertainty and a lack of meaningful consultation has a punitive effect on our businesses, the creative economy, jobs and tourism in live music in NSW," it said.
"As a result, members of the Australian Festival Association will now consider their futures in NSW."
Danny Rogers, co-director of the Laneway Festival, said there are other states which are "willing to better support our business".
Ms Berejiklian earlier this month said her government wouldn't back pill testing, despite the deputy state coroner recommending drug checks be made available at music festivals across NSW.
Politicians on Tuesday debated the licensing regime with Labor MP Dr Hugh McDermott, querying why, if the government truly wanted to ensure the safety of revellers, there was no mention of pill testing in the legislation.
Dr McDermott said pill testing needed to be treated as a public health issue.
"This government seems only concerned about safety so long as it does not conflict with their ideological opposition to pill testing, rather than providing evidence-based policies," he said.
However, Liberal MP Alister Henskens said pill testing made "little sense" as a harm minimisation strategy.
"It is true that pill testing can tell you if there are any impurities like paint in an ecstasy pill, but the evidence suggests that it's not the impurities that are killing our young people, but the ecstasy itself," he told parliament.
Leaked draft recommendations from deputy state coroner Harriet Grahame propose "best practice" pill testing be introduced and NSW Police cease using sniffer dogs to reduce the risk of revellers "double dosing, pre-loading and swallowing drugs" to avoid detection.
The coroner also suggests strip-searches be limited for similar reasons.
An inquiry into strip searches on Tuesday heard there was no justification for a 16-year-old girl's strip-search at a NSW festival north of Byron Bay in mid-2018.