Federal Indigenous Affairs Minister Nigel Scullion has had a heated exchange with protesters in Alice Springs who are angry over cuts to the Indigenous Advancement Strategy grants.

More than 50 people assembled out the front of the Alice Springs Convention Centre, where Senator Scullion was addressing a conference.

Speakers from local Aboriginal organisations told the rally that the local economy would suffer and criticised the Department of Indigenous Affairs for a lack of contact with them over funding cuts.

When Senator Scullion emerged from the building, he was immediately surrounded by a large crowd of protesters who accused him of trying to undermine Aboriginal organisations.

Senator Scullion engaged in a debate with the head of local outstation provider Ingkerreke, Scott McConnell.

"We got pissed around, we didn't get talked to, and even your departmental staff are calling it chaotic," Mr McConnell said.

"I have been working with Ingerreke ... because you get outcomes," Senator Scullion responded.

"It's not the organisation that's important, it's the people you're delivering the services to," he said to another protester.

"That's my job, to make sure they get those [services]."

Many of the protesters attended the rally in support of an adult education and language centre, the Institute of Aboriginal Development (IAD), which is facing job losses and possible closure due to the funding cuts.

More than 50 people protested against cuts to Indigenous services in Alice Springs. ( 783 ABC Alice Springs: Emma Sleath )

Former board member Owen Cole verbally sparred at length with Senator Scullion.

"At least he had the guts to come out and address us but what he was saying was totally incorrect, the process has been flawed and as a result a lot of Aboriginal organisations are going to have to consider closing or losing staff," he said after the protest.

"He's going to fund non-Aboriginal organisations instead of Aboriginal organisations so that's a fundamental breach of his position.

"It's just illogical what they're doing, they're closing down Aboriginal organisations for no good reason."

Film director and former IAD student Rachel Perkins told the crowd she would not have been able to pursue her career without the support of the IAD.

"It's really brave of people to stand up and go head to head with Nigel when he controls the purse strings and many of these people work in organisations that are funded by him, so it takes great guts and great courage," she said.

"I really respect those people who've come out to show support for IAD, come out to show disgust at the IAS and the very bad handling of Indigenous Affairs that we've been seeing over the last six months, that we've been seeing in terms of administering of funding at a federal level."