More than 70% of flood control funds in the Indian state of Assam have been "stolen" by politicians, officials and contractors, it is alleged.
The farmer and workers union said it had used the freedom of information law to find that money had been "siphoned" from the $2.5bn relief budget.
The government has not yet responded to the allegation.
Floods in Assam usually occur during the monsoon season, which generally lasts from June to September.
Millions are rendered homeless and deprived of livelihood as crops and properties are destroyed after the Brahmaputra river and other smaller rivers burst their banks and submerge scores of villages.
Protective embankments built by the water resources department routinely collapse during floods.
The All Assam Shramik Krishak Kalyan Parishad (AASKKP), the largest union of farmers and workers in the state, said that more than $2bn had been allocated for flood control programmes in Assam since 2000.
But not more than 30% of the money had been spent on flood control or anti-erosion measures, the union said.
"We can say with certainty now that much of these funds have been siphoned off," Baleswar Rongpi of the union said.
He said that a federal investigation should examine the use of the funds.
In Rohmaria area villagers have prevented the state-owned Oil India Limited (OIL) from lifting crude in their area for the last 10 years in protest against the government's alleged failure to implement effective anti-erosion measures.
They blame the loss of nearly 30 villages to the Brahmaputra river in their area.
Assam's water resources minister, Prithvi Majhi, who represents a constituency under which Rohmaria falls, was not willing to comment immediately - an official said the minister would "appropriately react" to the allegations at the right time.
The report of missing funds in Assam follows a slew of corruption scandals in India in recent months.
Last week federal telecommunications Minister A Raja resigned over claims he undersold mobile phone licences worth billions of dollars. He denies the claims.
Earlier this month, Suresh Kalmadi, the Commonwealth Games organising committee chief, quit his post in the Congress party. He has been under investigation over claims of corruption at October's sporting spectacular, and denies any wrongdoing.