Snowy Mountains residents say their water is smelly, undrinkable and makes them itchy.

In recent weeks, angry residents have swamped town meetings in the Snowy Monaro Regional shire with jars of the dirty water coming from their household taps.

Last month, the council hired divers to vacuum 70 cubic metres of sludge from the town's water plant.

But residents say their water still stinks, and now has an additional chlorine-like smell.

At the last public meeting, locals said questioned a $15 million promise from the NSW Deputy Premier John Barilaro to fix the water supply. They are concerned that the money has been absorbed into broader infrastructure projects.

Snowy Monaro Regional Council Mayor John Rooney says “appropriate steps” are being taken to improve water quality.

“The township is receiving an unprecedented amount of funding to achieve this,” he said in a statement.

“Residents are noticing these improvements with their water becoming clearer and with less odour.”

Reports say the Council has not submitted its business case to officially apply for the State Government funding.

A group of ratepayers are now refusing to pay for water until the situation is fixed.