India's environmental watchdog has slapped New Delhi's government with a $3.5 million fine for failing to enforce rules to reduce smog in the world's most polluted major city, officials said on Tuesday.

The National Green Tribunal penalised the capital administration for its lack of oversight after it emerged some polluting industries were still burning harmful waste in the open.

The tribunal, a national body tasked with ruling on environmental matters, had been hearing a plea from Delhi residents complaining about factories flouting laws on trash fires.

It said the Delhi government needed to instruct the court on how it would proceed with tackling the annual crisis that plagues the capital city of 20 million.

Each winter, Delhi chokes through haze so extreme that levels of airborne pollutants routinely eclipse safe limits by more than 30 times.

An estimated 1.1 million Indians die prematurely from air pollution every year.

The US embassy website in Delhi showed the level of harmful airborne particles hit 290 on Tuesday — nearly 12 times World Health Organization's (WHO) safe limits.

Delhi, which has shut down power plants and banned heavy trucks from the city in a bid to curb smog, has accused other states of not playing their part.

In particular, the capital has blamed governments in neighbouring Punjab and Haryana for crop fires that burn every year, sending smoke eastward.

Acrid smoke from these fires mingles with pollutants from cars, factories and construction sites in Delhi to create a lethal and persistent smog cocktail.

Delhi is not the first state to be slapped with a fine by the green watchdog, with West Bengal penalised roughly $700,000 for failure to clear its smoggy skies.

Delhi was among 14 Indian cities that figured in a list of the 20 most polluted cities across the globe this year issued by the WHO.