The decision was taken at a Cabinet meeting, chaired by Chief Minister Arvind Kejriwal.
"Approving the additional funds, the Cabinet said that these should be used only to make payments to safai karamcharis, including their salaries," the government said in a statement.
An official said the fund had been released for the betterment of sanitation workers who had complained of not getting salaries and other payments from their respective corporations.
The move comes a day after a delegation of sanitation workers under the aegis of 'Swachhta Karamchari Union' met Kejriwal and apprised him of the financial problems being faced by sanitation workers of MCDs.
It was informed to the delegation that in 2013-14 the east municipal corporation got Rs 287.72 crores compared to Rs 948 crores in 2016-17.
Similarly, the north municipal corporation received Rs 808.77 crores in 2013-14 compared to Rs 1318.26 crores in 2016-17, the government said.
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