Ministers were not happy with the company's upgrade plans

Professor Alan Alexander said the plan was fully compliant with improvements required through until 2010.

But the Scottish Executive said it fell short in areas such as support for new housing and commercial developments.

Environment Minister Ross Finnie said progress had been made but there was disagreement on the way forward.

Mr Finnie said: "We will move quickly to appoint an interim chair who will be tasked with ensuring that Scottish Water delivers the requirements placed on it within the charge limits set by the Water Industry Commission.

'Urgency needed'

"We set Scottish Water objectives to improve customer service, deliver further improvements in drinking water quality, improve environmental compliance and support new housing and economic developments.

"We now need urgently a plan for delivering these improvements that command the confidence of ministers, its regulators and its customers."

Following the announcement, Prof Alexander, 62, said he was sorry to be leaving Scottish Water over a difference in opinion.

Prof Alexander made a massive contribution in transforming the water industry for the people of Scotland Scottish Water spokesman

He added that he was pleased to have delivered significant improvements in the water industry in Scotland over the past four years.

A spokesman for Scottish Water said: "We deeply regret that Alan Alexander is leaving the organisation.

"He has made a massive contribution in transforming the water industry for the people of Scotland.

"It now costs nearly �3m a week less to run the industry than it did four years ago and nearly every aspect of customer service has improved."

Scottish National Party environment spokesman Ken Gibson MSP said: "Clearly, a huge gulf in opinion has developed between Prof Alexander and ministers.

"Perhaps he jumped before he was pushed, but the timing of Prof Alexander's departure is unfortunate given the challenges currently facing Scotland's water infrastructure."

'Parliamentary bills'

Tory environment spokesman Alex Johnstone MSP added: "Scottish Water needs to be opened up to the competition of the marketplace by being taken out of nationalised control, because competition brings with it a drive for lower prices, higher quality and greater efficiency."

Prof Alexander was appointed chairman of Scottish Water in 2001, when the body was created from the old regional water authorities.

A former professor of local and public management at Strathclyde University, he was paid about �70,000 in his first year for a three-and-a-half day week, an annual salary which went down to �50,000 in subsequent years for a two-and-a-half day week.