The department, headed by minister Gopal Rai, has asked officials to take steps to ensure that all projects, which are being executed, are completed within the time-line prescribed in the work order.
The move came a day after Chief Minister Arvind Kejriwal and his deputy Manish Sisodia directed officials concerned to speed up the pace of the development works in unauthorised colonies in the national capital.
"Appropriate action will be initiated against the contractors including imposition of penalty for not completing the work as per time schedule," an official said.
In Delhi, there are around 1,600 unauthorised colonies whose residents play a vital role in deciding the fate of any political party in elections.
The government directive comes at a time when the city is staring at likely bypolls following the disqualification of 20 AAP MLAs by the Election Commission (EC) for allegedly holding office of profit. The party has challenged the EC's order in the Delhi High court.
The official said that a fortnightly review meeting will be held in the chamber of the chief engineers to review the progress of each and every project with superintending engineer concerned of the circle.
"Besides, a similar protocol of review of all the cases on weekly basis will be followed by the superintending engineer with executive engineer," an official said.
Any laxity in compliance of the order will be viewed seriously and action will be taken against the entire erring officer, the official said.
"In cases, where the circumstances of delay are beyond the control of the department, a fresh time-line will be prescribed after taking into consideration all the constraints in the process of execution of the project.
"It will be the responsibility of superintending and executive engineers to ensure the project is completed within revised time-line," official also said.