Mayor John Stafford said the $220,000 equipment from South Australia would take about two weeks to install and commission.

A fire sparked by an electrical fault destroyed the former six-year-old water plant on December 8. The town has been enduring level three restrictions ever since, with water carted daily from Crookwell to provide for residents' needs.

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Cr Stafford said everything was tracking as it should.

"The site has been prepared and is ready to install the new plant when it arrives," he said.

"We will continue carting water until we're confident the plant is functioning as it should and the water quality is up to standard."

A crane hoisted the old equipment out last week.

In the meantime, contractors are carting between 200 and 240 kilolitres per day from Crookwell's water supply to the town at an approximate $100,000 cost per month. The mayor described it as "a huge logistical and time consuming" exercise on which contractors were employed full time.

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The council agreed to the plant's purchase before Christmas and state authorities subsequently agreed.

Cr Stafford said the state government was intrinsic to this infrastructure and a quest to build a new dam for Taralga. The council discovered last year that the existing one was leaking and erosion had been occurring for several years.

Cr Stafford said an application for State funding assistance was being finalised.

"It is a work in progress," he said of the project.

"We are chasing funding and talking to anyone and everyone who wants to listen....We need to convince the powers that be and it's critical we get the support of our local Members (of parliament) in doing that.

"We can't have a scenario where we're waiting for an answer on a dam that will cost millions of dollars. That's the task before us."

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He estimated a $10 million cost but many factors were fluid, including land acquisitions and design.

Upper Lachlan Shire Council has held preliminary talks with landowners near the existing dam. It is aiming to build a storage twice the current size, thereby providing for growth and "drought proofing" the town.

The mayor said people remained frustrated at being on level three restrictions, limiting them to 230 to 240 kilolitres per day, during one of the best seasons they'd enjoyed.

"They are keen to have this resolved," he said.

"...It has to be because nothing is more important than water. It's the most basic service we provide and everything we can do, as fast as possible, is being applied to this."

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