"Now it's too late. The last thing they said to us was give us the money for the plane fares instead, " producer Christian Colson told the Daily Telegraph.
Makers of the film, which has won 10 Oscar nominations and is the frontrunner for the best picture award, had decided to take the two children to the Oscars as a once-in-a-lifetime experience.
But the parents of the eight-year-olds, who play child versions of the lead roles, objected. Azharuddin's father was in hospital and his mother would not let him travel with a chaperone.
Azharuddin's mother Shameem Ismail said she was told her son would receive money when he finishes school, and that they would be given a flat.
"But we need the money and help now. It is hard living like this, " she told the paper.
"I am worried that after the Oscars are over, they will forget us and no one will be interested. Where we live now may be cleared any time and then we will have nowhere to live at all."
Azharuddin was Saturday unaware of his parents' conversations with the producers, telling the newspaper: "I am going to the Oscars. It is very exciting. I am practising my English for it, " he said.
Azharuddin's father suffers from tuberculosis and Rubina's father has not worked since breaking a leg.
Shortly before the film was released, Azharuddin's family was evicted from its slum hut, and now live under a tarpaulin sheet at the edge of the slum.
Colson said the family was given money from a fund set up to deal with health and housing emergencies to build a new home.
"We sent the money, it vanished and the house never materialised, " he said, adding the producers were currently trying to find a new home for the family.