Animal welfare groups say they are disappointed the NSW Government has shied away from implementing key recommendations from an inquiry into the mistreatment of animals at puppy factories.

Key points: Inquiry into NSW puppy farms received 300 submissions

Inquiry into NSW puppy farms received 300 submissions Among them were that dogs cannibalised each other at farms

Among them were that dogs cannibalised each other at farms Instead of licensing scheme, Government opts for review of regulations and microchipping register

The inquiry, which received more than 300 submissions, heard horrific allegations of neglect and abuse of animals at puppy farms, including accounts of hungry dogs cannibalising other animals and pups only being fed roadkill

The inquiry recommended the Government set up a stand-alone licensing scheme that would require all breeders to register and include a licence number with the sale of each animal.

Instead Primary Industries Minister Niall Blair announced the Government would conduct a review of the way the industry was regulated and ensure breeders were identified on the NSW Companion Animals microchipping register.

"We know there's many breeders out there that are doing the right thing," Mr Blair said.

"We believe that enhancing and working on the existing system will not only try and stamp out those that are doing the wrong thing, but won't put that extra burden on the many breeders out there who are doing the right thing and following the rules."

He said the Government would also review whether prosecutions handed out to those who broke the law were adequate.

The Government will spend $200,000 on a targeted compliance and education operation in relation to animal welfare standards in the pet breeding industry.

NSW Premier Mike Baird and a puppy, in a series of his images from his Facebook page. ( Facebook: Mike Baird MP )

Announcing the news on Facebook, Premier Mike Baird uploaded a series of photos of puppies playing on his desk.

"Today we announced that we will be reviewing penalties and enforcement measures to ensure that dodgy operators can be dealt with seriously and shut down where necessary," the statement reads.

"It is simply unacceptable for people to be treating puppies or other animals in a cruel manner in an attempt to make a quick buck. We need to act and we will."

Government response inadequate: Animal Justice MP

But animal rights activists were less pleased than the Premier with the Government's response.

Mark Pearson, an Animal Justice MP who was on the committee which conducted the inquiry, has slammed the Government's response.

"It's extremely disappointing and it's really going to come back to bite the Government because they haven't addressed the fundamental concerns as to why the whole inquiry occurred in the first place," Mr Pearson said.

"And that is because these puppy farms were operating and not being detected by regulatory authorities that are in place at the moment or by any that were recommended."

He said without stronger action the cruel treatment at puppy factories would continue.

"This issue is not going to go away," Mr Pearson said.

"It's going to eventually embarrass the Government again and I'd say we'll be having [an] inquiry investigating all this within two years."

The RSPCA's NSW chief executive Steven Coleman said the changes the Government was making were a step in the right direction, but they did not go far enough.

"It is frustrating, we have had review after review, our ultimate approach to this now is we've exhausted all review opportunities," Mr Coleman said.

"We've given the information that we saw fit from a practical and compliance perspective, now we just want to see some runs on the board."