The decision comes after NSW Lotteries was sold to Tatts Group in 2010 for a five-year period, which allowed newsagents time to prepare for greater competition.

This period ends at the start of April and big supermarket chains have expressed an interest in selling the products.

While there's no guarantee supermarkets will sell lottery tickets at their petrol stations, it could prove a devastating blow for small newsagents trying to compete.

Joint owner of North Haven Newsagency and Lake Cathie News and Gifts Paul Heather has been a newsagent for the past six years and said the issue of Coles and Woolworths selling lottery tickets at petrol stations could prove more problematic than first thought.

"Imagine the queues of cars along Ocean Drive waiting to buy petrol while the staff inside have a queue of people wanting to buy lottery tickets," he said.

Another issue is the refitting of lottery terminals in newsagents, which can cost up to $25,000, according to Mr Heather. Newsagents can apply for a $10,000 grant which will be be made available through a $15 million state government assistance fund.

The fund will provide the opportunity for newsagents to update their point of sale shop fittings, but Mr Heather felt it was unfair on local newsagents who may be faced with covering some of the cost of the refit.

"We won't be given a cheque of $10,000 - it's a maximum of $10,000," he said.

"So we might only get $1000 and then we'll have to make up the rest.

"Where's it going to come from?

"It would take more than three years in many cases to recoup $15,000, plus interest from the sale of NSW Lottery products."

Port Macquarie MP Leslie Williams said the solution was not ideal, but the government was helping out where it could.

"We recognise that a shop fit-out can be an expensive exercise, which is why we've committed up to $10,000 for approved fit-outs which previously the newsagents had to pay for themselves."

paul.jobber@fairfaxmedia.com.au