Member for Dubbo, Dugald Saunders was in Narromine last Wednesday to announce the state funding, which will help upgrade the existing groundwater supply to access deeper bores and develop a filtration system.

"We know Narromine as a town relies on bore water and there has been a drop in the level of the current bore," Mr Saunders said.

"So this $2 million is to help the council go deeper with their bore and access some water they know is there, that contains quite a lot of iron and manganese."

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"They will be able to access this deeper groundwater and we will also be providing money to help come up with a filtration system.

"An all-in-one filtration system that will make this system that can provide for the years ahead."

Narromine Shire Mayor Craig Davies said the council were "excited" about the project and that the funding ensures the work doesn't come at a cost to ratepayers already doing things tough.

"It is (exciting) there's no doubt about it," he said.

"This is exactly the project we need for our water supply here in Narromine.

"Not only does it guarantee water for the next four years, it also allows us to think of development in the shire, which is critical for us and one of our real focal points."

Mr Saunders said work for the new system will begin as early as July 1.

Councillor Davies thanked Dugald Saunders for supporting the project and thanked the community who were adhering to the level three water restrictions during the hard hitting drought.

The funding for the project comes from the $170 million drought stimulus package.

"People have told us that water is the number one priority at the moment as we continue to battle this record-breaking drought, and the Government is doing everything it can to help our regional communities," Mr Saunders said.