The funding from the NSW government is expected to further improve the shire's water infrastructure, including the construction of a second storage dam to almost double the current water holding capacity.

The funding comes after extensive lobbying of both state and federal governments by the Bogan Shire Council in a bid to improve water security for residents.

"Council wants to make sure that everything possible is done to ensure that the residents of Bogan Shire have access to water throughout this drought and for future droughts. This funding will certainly help that situation," Bogan Shire Mayor Ray Donald said.

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"Council resolved [at this month's council meeting] to express our thanks to the minister for these grant funds which will help us as we experience the worst drought in living memory, in duration and severity."

With no significant rainfall across the shire in almost three years, the storages at Girilambone and Coolabah have had to be supplemented with water from Nyngan.

Bogan Shire general manager Derek Francis said the council had been carting up to six loads of per day to Girilambone for several months, and had now commenced cartage to Coolabah.

"For the time being there is still water stored at Hermidale, which also has access to the Cobar water board's pipeline," Mr Francis said.

"The NSW government has confirmed it will continue to fund the carting of water to the Shire's villages.

"In the closing months of the last financial year, the council received $40,000 towards this cost and this is expected to be significantly more this year."

Included in the funding is $8.2 million for the construction of a second water storage at Nyngan expected to hold over 500Ml, with construction planned to start in the second half of this year.

The council said the construction will not only benefit local business and generate employment, but once completed the storage will provide for more water security in future droughts.

It will complement the existing storage which is currently holding 500ML of emergency water supply for Nyngan and Cobar, to be used if water is no longer available from Lake Burrendong.

The funding also includes $750,000 to replace the Belaringar Creek Syphon on the Albert Priest channel, to address leakage, $950,000 to survey and repair leaks in the Albert Priest channel bed, $20,000 for the installation of a temporary weir south of the main Nyngan water supply weir and $250,000 to investigate potential bore sites east of Nyngan to supplement the town's water supply in an emergency,