The Dorset Council received a $1.47 million grant in 2015 to create a cycle path between Scottsdale and Launceston, occupying a long-disused rail line.

The grant expires in March next year with an expectation that construction would be completed by then. However, work has been delayed for four years following protest from competing heritage rail advocates, and the council fears the grant will expire before the trail can be built.

Ms Archer said she was working with stakeholders to secure the money.

"I am currently having discussions with Dorset Council about how they may plan to proceed," she said.

"I have contacted the [federal Infrastructure, Transport and Regional Development] Minister [Michael McCormack] regarding status of the funding beyond the March date."

A Legislative Council Inquiry into the North East Rail Corridor recommended on Thursday that a rail trail for cyclists be established between Scottsdale and Lilydale, and a heritage train established between Launceston and Lilydale.

The funding came through the Building Better Regions Fund.