First of all, you are missing an end.
function lightOnFire(part)
if not water then
end
end
There is no need to declare water, unless you are going to use it again later. You also don't have to declare fire, because you can parent it in instance.new. "workspace" is short for game.Workspace. You might want to use waitforchild to make sure your script always works both online and in studio. Finally, unless you want to use firePart or call that function again somewhere, there is a much simpler way to create this connection.
workspace:WaitForChild("FirePart").Touched:Connect(function(part)
if not part:FindFirstChild("Fire") then
Instance.new("Fire", part)
end
end)