"These modules are a key aspect from the Action for Healthy Waterways - our extensive reform package announced earlier this month to make sure we have clean water to drink and irrigation to support a sustainable economy," O'Connor said.
"Farmers and growers have shown that they are able to roll with the punches and most have been well-prepared for these types of events, but as the months go by without significant rain in many parts of the country, there is a cumulative impact."
Significant drought had affected many parts of New Zealand and the fund would provide relief across all of the North Island, the Chatham Islands, Christchurch, Marlborough, Nelson, Tasman, Selwyn, Kaikoura, and Waimakariri districts and regions.
"The Government knows our farmers, growers and producers will play a critical role in New Zealand's economic recovery from Covid-19, so helping reduce pressure on farmers and their families, plan for the future, and drive regional recovery efforts is a priority for us," O'Connor said.
The fund, now totalling $3.5m, would be managed by the Ministry for Primary Industries and would pay for recovery advisory services in drought-affected regions.
Funds would be allocated to those who already applied before it was closed on Friday, June 12.
Around 1000 people applied, and successful applicants would be notified by June 30.