The state government first budgeted to fund Tamworth and Gunnedah councils to build the project in 2020, but the ongoing saga over costs has seen the project continually delayed.

On Wednesday morning, Kevin Anderson announced the shock decision for the state to take over the scheme after Tamworth and Gunnedah councils demanded the state provide a $1.4 million contingency fund in case of cost blowouts.

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The MP blamed a cost blowout on delays to the project as local and state governments spent years disputing who would pick up the bill.

Mr Anderson said the decision was made after meeting with the minister for regional transport and roads Sam Farraway earlier this week.

"The Rangari Road issue has gone on long enough, and after discussions with the minister I'm pleased a favourable resolution has been reached," Mr Anderson said.

"Transport for NSW, will now take over delivery of the project to ensure a smoother and safer road is finally delivered to the community.

"The community and I are disappointed with the ongoing delays and the time taken to get this project shovel ready has meant the costs have increased.

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"The latest delay was a request for further contingency funding on top of the additional $3.3 million we provided in the recent budget. The NSW Government is investing $15.6 million to the sealing of Rangari Road.

"I have worked hard collaborating with Gunnedah and Tamworth councils to come up with a solution, but the community have had enough and demanded that the delays stop and work commence. It's time to get the job done.

"Transport have assured that the work will start in the coming months and once finished, I look forward to our community having a safer journey along this important road."

Minister for Regional Transport and Roads Sam Farraway said that although challenges such as drought, bushfires, COVID-19 and floods have impacted a number infrastructure projects across the state, Rangari Road had been delayed for too long.

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"The NSW Government is rolling out a record $19.4 billion infrastructure pipeline across regional NSW, we have faced set backs on many projects but this upgrade really does just need to get started," Mr Farraway said.

The upgrade will seal and widen about 20km of Rangari Road, from 3.8km east of the boundary between Gunnedah and Tamworth local government areas boundary to the boundary of Gunnedah and Narrabri local government areas, past Wean Road.

Gunnedah and Tamworth mayors Jamie Chaffey and Russell Webb told the Leader on Monday that they couldn't finish the project with just the $15.6 million dedicated to the project by the state government.

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