Big questions hang over the future of Dunedin's waterfront development plan after confirmation it will receive $19.9 million from the Provincial Growth Fund.

The announcement was made at the Dunedin Centre this afternoon, at an event attended by Regional Economic Development Minister Shane Jones and Economic Development Minister David Parker.

The Otago Daily Times understands the Dunedin City Council - on behalf of the city's waterfront project partners - had sought a significantly higher sum, understood to be $100 million, but it appears to have been knocked back.

Instead, the $19.9 million announced this afternoon was described as being for the "first stage'' of the waterfront transformation, "which involves constructing the wharf infrastructure and public space'', Mr Jones said in a statement.

The allocation was described as an "in-principle investment'' towards the "ambitious'' waterfront project, and one that would complement the DCC's plan to build a $20 million pedestrian and cycling bridge connecting the waterfront to the city.

"It is an ambitious project which will start the transformation of Dunedin's waterfront into an accessible destination for locals and visitors. This will bring people into the area which will encourage economic growth and job creation,'' Mr Jones said.

The announcement came more than a year after the council submitted the city's bid for PGF funding for the waterfront.

The cost of groundworks, establishing building platforms and sea wall upgrades needed to prepare the waterfront for development have long been seen as a barrier to private sector investment, making the bid, and the sum awarded, crucial to the wider project.

Dunedin's mostly moribund Hillside workshops have also received a $20 million injection of Government funds.

The Government has also announced $5.8 million of funding for a manufacturing agriculture technology business unit within Dunedin-based company Scott Technology and smaller amounts of funding for seven other projects.

The Government announced today it is dedicating $19.97 million from its Provincial Growth Fund (PGF) to re-establish the Hillside workshop as a mechanical hub and heavy engineering facility to service KiwiRail's trains.

Most work at Hillside ended in 2012, after KiwiRail awarded an estimated $29 million manufacturing contract to a Chinese company in what was a terminal blow to the workshops.

Since then some work has continued, however, and private companies have also used the workshops.

Bradken has used the foundry and luxury train company Antipodean Explorer has used space there to upgrade its carriages.

Mr Jones said today under the Labour-led Government rail was back on track and the days of managed decline were over.

"Hillside is the only heavy lifting rail facility in the South Island so it is vital to KiwiRail's business,'' Mr Jones said.

"The Coalition Government is investing more than a billion dollars in rail, including $300 million from the PGF in Budget 2019.

"It makes sense to ensure there are quality facilities available to support KiwiRail to maintain their trains and undertake a range of heavy maintenance and upgrade work.''

The PGF was also investing almost $8 million in the smaller engineering and manufacturing sectors, which Mr Jones said were vital for the region both in terms of economic growth and employment opportunities.

"We are providing $5.8 million towards the establishment of a dedicated manufacturing agriculture technology business unit within Dunedin-based company Scott Technology.

"This unit will be dedicated to automation solutions and services for New Zealand food processors, producers and their suppliers.''

The funding package also included nearly $500,000 for the Southland and Otago Regional Engineering Collective (SOREC).

Mr Parker said the funding would support the collective work that SOREC was doing to find ways to reinvigorate the sector.

"Both this and the seven other projects that received funding today will create a step change in productivity and efficiency, and lead to the development of 87 new permanent jobs in the region.''