The Victorian Water Department will has been called in to resolve a dispute between Coliban Water and the company working on upgrades to the Harcourt Valley irrigation network.

The $40 million Harcourt Rural Modernisation Project has been on hold since the contractor Redline walked off the job last month. 

Redline says it is waiting for final designs from Coliban, but the water authority wants Redline to proceed without delay.

Victoria’s Water Minister, Lisa Neville, says an independent mediator could be required.

“This is something that the community have an expectation about,” she said.

“It's an important piece of infrastructure and it needs to continue to be built without additional cost to taxpayers and water consumers.

“So I'd like to see a compromise or agreement very soon that would see this project move forward very quickly.”

She said there was still hope that the arguing parties could find a way forward.

“I expect that they would work with the department to get there otherwise we will look at some sort of independent mediator that I hope both parties would sign up to,” Ms Neville said.