Pupils at Tarago Public School are copping the brunt of the odour from waste trains that park on a nearby siding at the town's railway station, sometimes for several hours.

The trains stop on the siding on their way to Veolia's Woodlawn Bioreactor, which uses rubbish to generate electricity.

School P and C secretary Megan Alcock said she and fellow parents were concerned about the impact on their children.

"Sometimes the smell [from the trains] is so bad that they won’t let the kids out of the classroom," she said.

"They’ve actually got to sit in the classroom with the windows and doors shut, and the airconditioning on.

"That, in itself, is unacceptable."

Ms Alcock also had concerns about the diesel fumes that wafted into the school, and said the P and C planned to start a petition calling for the trains to be parked only outside the town boundaries.

She said the trains upset her seven-year-old daughter, one of the 46 pupils at the school, who described the locomotives as dirty, smelly and ugly.

When The Canberra Times photographed one of the waste trains at Tarago Railway Station on September 14, some containers were visibly leaking and the smell was evident.

Rubbish from Canberra could also add to the volumes being sent by rail to the bioreactor if Capital Recycling Solutions, which wants to open a waste transfer centre in Fyshwick, is given permission to put non-recyclable material on trains to Woodlawn.

The NSW government says it is addressing the issue and providing "significant community benefits" by allocating $7.7 million to extend the existing passing loop at Tarago under its "fixing country rail" program.

The government funding, announced in May, covers almost the entire cost of the $8.6 million extension.

In a statement, a Transport for NSW spokesperson said the extended siding would be used to temporarily store empty waste trains, allowing loaded trains to go straight to Veolia's unloading facility at Crisps Creek.

"The extended passing loop will deliver significant community benefits as it will temporarily hold empty trains, allowing the loaded trains to move directly to Veolia’s Crisps Creek unloading facility," the spokesperson said.

"The existing passing loop is short, meaning loaded waste trains need to be broken up, shunted and stored for extended periods.

"Extending the passing loop will ensure loaded trains no longer need to be broken up and shunted at this site because they can be moved directly to the site."

But not everyone is happy with that arrangement.

Tarago and District Progress Association secretary Adrian Ellson said the extension of the passing loop would mean some waste train carriages would be parked directly behind the school.

He was further upset by the lack of consultation with the community, saying none was carried out before the funding was allocated.

He said the community would be happy for the rail sidings at Crisps Creek to be extended, but not the passing loop.

"It's morally and ethically incomprehensible to park a waste train up behind a school," Mr Ellson said.

"The moment they did that, they should've gone out to consultation."

While some Tarago locals spoken to by The Canberra Times said the smell from waste trains had not been an issue for them, Mr Ellson said it forced some residents and businesses to close their doors and windows on particularly hot days.

He said he could sometimes smell the "pungent" odour from his house.

The Canberra Times asked Transport for NSW questions including what was done to consult with the Tarago community about extending the passing loop.

Other questions included whether Veolia had applied to extend the rail sidings at its Crisps Creek Intermodal Facility, before money was instead allocated to the passing loop extension.

In response to the questions, Transport for NSW provided a generic statement that did not answer any of them.

Veolia's Woodlawn facilities manager Henry Gundry was contacted for comment but did not respond to phone messages.