Which institutions can propose an alternative to proposals contained in a citizens' initiative?

No institution is authorised to offer an alternative to a proposal contained in a citizen’s initiative. 

Citizens Initiated Referenda Act 1993

( Enacted on 28 September 1993)

http://www.legislation.govt.nz/act/public/1993/0101/latest/DLM317193.html?search=ts_act%40bill%40regulation%40deemedreg_citizens_resel_25_h&p=1