The Morrison government has dialled up the pressure on NSW with millions in funding being withheld over the state's failure to complete Murray-Darling Basin management plans.
Federal Water Minister David Littleproud has written to his state counterpart Melinda Pavey, raising concerns that none of the 20 proposed water resource plans have been submitted.
"I am disappointed these plans were not able to be submitted by the end of last year, given the many years over which New South Wales has had to develop these plans," he wrote.
The federal government had made regulations to extend the deadline for the submission of water resource plans at the request of NSW, he said.
Water resource plans set rules on how much water can be taken from the system, including for irrigation.
There is more than $1 billion in funding for the state at risk if the new April 30 deadline for the 20 plans is missed.
"It is not my intention to approve commonwealth expenditure to New South Wales related to the basin plan until there is demonstrated progress on water resource plans," Mr Littleproud wrote.
There is more than $48 million in federal funding covering floodplain harvesting, fishways, metering and investments in riverbank fencing being withheld.
Ms Pavey said the water resource plans would be delivered mid-way through the year.
She said the NSW government had explained to Mr Littleproud's office the extremity of the drought was behind the delay.
"Our communities need to see these before they are formally submitted as they are integral to their success and a key part of their progression," she told the Sydney Morning Herald.
In the letter, Mr Littleproud acknowledges NSW has the largest number of plans to develop, noting the significant challenges stemming from the drought.
But he argues his home state of Queensland, where the drought is also biting, finalised its water resource plans last year.
Victoria, South Australia and the ACT have submitted plans.
NSW has threatened to leave the Murray-Darling Basin Plan, sparking tensions with the federal government and other states in the river system.
Australian Associated Press