The NSW government spent millions of dollars buying a stake in a loss-making south-coast oyster company, leaving the industry concerned the investment lacked transparency and posed a potential conflict of interest.

Some oyster farmers have accused the government of playing favourites over its decision to invest $3.3 million in Australia's Oyster Coast, and claimed the move would distort the market in the competitive industry.

The NSW government invested $3.3 million in the company, Australia's Oyster Coast. Credit:Instagram: @australiasoystercoast

Caroline Henry, chair of the NSW Farmers Federation Oyster Committee, said the investment was "not a good look for the industry".

“How can the government make informed decisions in an unbiased manner with a company that they actually have part ownership in?” said Ms Henry, who owns and runs an oyster farm on Wonboyn Lake on the state's south coast.