THE O’Farrell government will be given a two-year ­deadline to sell the state’s ­remaining public assets — ­including the electricity network — in return for billions of dollars in Commonwealth money to help fund new infrastructure for Sydney.

While a decision has yet to be made on the actual time limit, The Daily Telegraph can reveal that Treasurer Joe Hockey is considering a ­deadline of two to three years for the sale of state-owned ­assets in order to qualify for federal assistance.

The take-it-or-leave-it ­ultimatum will be given to all state treasurers when they meet Mr Hockey next week to discuss incentives for the states to “recycle” assets in return for assistance in funding productive infrastructure.

A source close to the federal government’s expenditure ­review committee working on the final numbers for the May Budget confirmed that billions of dollars in financial assistance was on offer to the states but would be tied to the ­recycling of state assets.

Mr Hockey is believed to be ramping up pressure on the states by now imposing a deadline to qualify.

The form of those incentives, whether a share of the company tax levied on privatised assets or cold, hard cash, was still being negotiated.

However, the offer would be not open-ended, the source confirmed. States that failed to deliver on commitments in time could be locked out of Commonwealth funds.

In NSW the standout asset is the electricity distribution network — the so-called poles and wires — which is estimated could raise between $3 ­billion to $5 billion.

The infrastructure component of the May Budget will be critical to Mr Hockey’s attempts­ to reignite the national­ economy­.

A Productivity Commission report last week warned that this would be unachievable without significant reform to the way current projects are assessed and undertaken.

It revealed that billions of dollars in taxpayer funds had been wasted by the federal and state governments due to poor planning and procurement practices.

Mr Hockey revealed two weeks ago to The Daily Telegraph that states would be forced to adopt a “use it or lose it” approach and the states would not be paid unless they submitted proper plans and met construction deadlines.

Premier Barry O’Farrell last week signalled that he would co-operate with the federal government.

Mr O’Farrell recently also changed his mind about building a second Sydney airport at Badgerys Creek, claiming he had been convinced of its merit as long as it was tied to major local infrastructure projects in western Sydney.