The development comes amid strains in relations between Congress and Trinamool Congress over Presidential elections in which Mamata Banerjee has so far not committed her support to UPA Presidential nominee Pranab Mukherjee.
Trinamool Congress leaders refused to comment on the development.
Rural Development Minister Jairam Ramesh, who also holds the portfolio of Drinking Water and Sanitation, has written to Chief Minister Mamata Banerjee asking her to expedite the spending of available funds and report it to the Centre.
"The first instalment of NRDWP funds for 2012/13 amounting Rs 168.47 crore could not be released so far to your state because the high unspent balance of Rs 253.29 crore with the state as on June 1, 2012," Ramesh said in his letter highlighting the delay in implementing the project.
He informed Banerjee that the Centre would be able to release funds only after it receives report from the state on the utilisation of money lying with the state.
Ministry sources said Ramesh has also written a similar letter to Banerjee on the high unspent balance of MNREGA fund.
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The refusal to release the funds comes at a time when relations between Congress and Trinamool, a constituent of the UPA, have been uneasy over presidential poll.
Mukherjee is reaching Kolkata today to garner support for his candidature.
Ramesh had recently reviewed drinking water problems in West Bengal which is one of the east Indian states affected by the problem of arsenic and fluoride.