Revelations the state government has run out of money to complete the $440 million Murray Basin Rail Project came at a very unfortunate time for the upgrade, according to a leading rail infrastructure expert.
The State Government has admitted it has spent most of the project's entire budget, halfway through its completion.
Minister for Transport Infrastructure Jacinta Allan said much of the remaining $23m set aside for the project would be used for urgent repairs to the Manangatang line.
The upgrading of the Manangatang and Sea Lake lines, from broad to standard gauge track, was due to start next month but has again been put on hold.
Standardization of the line from Maryborough through Ballarat to Geelong has yet to occur.
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Rail Futures Institute secretary Bill Russell said Victoria had very real needs for transport investment, particularly in rail.
"We have been able to identify quite a lot of these needs, but there are financial constraints, with the economy tightening, so Victoria faces a real problem of prioritisation," Dr Russell said.
Completion of the Murray Basin project would be challenging but remained very important, he said.
"The state transport budget is very ambitious ... there's a range of urgent investment, needed to deal with urban growth, as well as important improvements to the regional passenger and freight network.
"The Murray Basin Rail Project is a very large investment, of great importance for the north-west, but now it's competing with the needs of urban expansion, under an even more competitive fiscal climate.
"How will it fit into the State Budget, over the next two or three years, in competition with other commitments?"
Dr Russell said the issue probably didn't lie with the business case, but with practical contract management.
The project had been commenced at a time of constraints on the availability of expert labor and management.
He said the Victorian Auditor-General was now looking at the project and would no doubt report on the nature of problems encountered so far.
"Obviously, they will look at the financial management issues and the extent to which the business case was realistic," Dr Russell said.
The VAGO's office confirmed a report was expected to be released next year.
Dr Russell said he was confident the project would ultimately be completed properly, although he warned there would be a substantial cost involved.
The Federal government might also baulk at committing more money to the project, having already put in half the funding.
"It's unfortunate funds have run out, midstream, because funding for the next phase is critically important for the project's success.
"The north western intermodal train, from Merbein to Melbourne, now faces a longer cycle time than before the project due to the need to travel via Ararat and Cressy, and this will continue until the project is completed.
"And wheat movements next season will be slower and less flexible until the route via Ballarat to Geelong is standardized and adequate passing loops are provided along the corridor."
Last year, the government pushed the timeline for completion of the Sea Lake and Manangatang lines out, after delays in completion of the Maryborough to Ararat section of the project.
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Ms Allan said extra investment was required for Stage Two of the project, after "challenges" emerged during the work.
"We are now re-evaluating the most effective way to deliver the remaining stages of the project and the long-term benefits to industry that will accompany it," Ms Allan said.
A Rail Projects Victoria team physically walked the Sea Lake and Manangatang lines, after the challenges experienced with the second stage and consultation with industry.
"As a consequence of that and further advice from V/Line, we were advised that urgent works need to be done on the Manangatang line and that if not urgently fixed, the line would need to be closed," she said.
"Options to continue to improve freight outcomes will be the subject of a business case that will need to be developed in partnership with the Federal Government, which will be funded with the remaining Murray Basin Rail Project allocation."
Deputy Prime Minister and Nationals Party leader Michael McCormack said it was disappointing the full objectives of the Murray Basin Freight Rail upgrade had not been delivered within the committed funding envelope.
Mr McCormack said the upgrade and standardisation of the network remained a priority for the federal government.
"I will be working closely with Minister Allan and the Victorian government to understand how exactly to best address the current situation and the potential next steps to progress the project," Mr McCormack said.
Berriwillock grain grower Garry Bibby said the delay would force more trucks on to the roads, causing significant damage.
"It's going to destroy the highways," Mr Bibby said.
"We are all looking for the cheapest form of freight, and obviously it's rail, but it's disappointing when the government has ripped the money out of our hands.
"We didn't see the $900m from the sale of the Port of Melbourne lease and the $400m from the sale of Rural Finance has evaporated."
Manangatang grains and pulse producer Brian Barry said fixing the rail system was vital.
"These two rail lines are the furthest from the port, and there's no doubt about it, the cost of freight is absolutely killing us, and has been for years and years," Mr Barry said.
"We rely on productivity gains to keep ahead of the game, and I have to say they are getting fairly skinny now.
"That's the reason we desperately need reliable transport."
He said residents of the north-west were being discriminated against.
"You wouldn't move us away from here with a bomb.
"But all we ask for is a fair go, and I'm sorry to say, it's not happening.
"It's got to the stage now where I saw a train go down there (on the Manangatang line) three weeks ago and - I am not joking - I could jog faster than what it was travelling.
He called on the government to find the money to finish the project.
"I don't care where they find it from; they can stop a couple of projects in Melbourne.
"This project has to happen, now, it's that critical."
Mr Barry said he'd been suspicious there had been problems with the project, for some time.
"I've been saying to the locals here I'm dead scared they are going to run out of money, and we are going to be left in the lurch," he said.
Opposition Agriculture Spokesman Peter Walsh said the modernisation project had been thrown into chaos.
"There's been a $100m blow out on the Mildura line stage, the Maryborough-Ararat works have been hampered by the use of second-hand rail line, broken welds and slow speeds, and now Stage Three is indefinitely on hold," Mr Walsh said.
He said there was now a huge question mark over the future of the project.
"Instead of trying to rewrite history and shifting the blame, Jacinta Allan and [Premier] Daniel Andrews should be working on funding and finishing this critical rail upgrade project as a priority," he said.
"If they can find the money to pay for multi-billion-dollar cost blowouts in Melbourne, then the government must cough up the extra funds required to finish the rail project."
Victorian Farmers Federation president David Jochinke said it sounded as though the project had gone horribly wrong.
"We haven't had any formal notification from the government," Mr Jochinke said.
"We do expect them to deliver on the project, as promised.
"There has been an infrastructure spend in the city of far more significant value, and we want ours done, as well."
He said the VFF would be seeking promises, from the government, the project would be delivered.
"Ultimately, we have half a railway system, and it has to be resolved."
Rail Freight Advisory Committee chair, Pyramid Hill producer, Peter Tuohey said it appeared the desktop business case didn't take into account the level of degradation of the track.
"They didn't look at the track and inspect it properly, that was probably the flaw in their model," Mr Tuohey said.
It had since been realised it was "hugely more expensive" to fix the lines.
"The RPV staff have walked the track and found every sleeper needs replacing," he said.
"They (the sleepers) are absolutely stuffed, so they have to do a new business plan, then get Victorian and Federal Government funding."
He said he was pressing for the advisory committee, which is made up of representatives from agriculture, the transport and grain handling sectors, to be reformed.
"This year's budget is done, so you would hope that the business case will be completed and there will be money in next year's budget," he said.
"I have told the Minister that she has stood there with Premier Daniel Andrews and (former Agriculture Minister Jaala Pulford) and said this line will be built."
He said he had urged the state's rail authorities to advise customers what was going on.
"They need to get out there and tell people and tell people that this is going to happen, and it's going to be done properly," he said.
He said he did not anticipate a significant impact on this year's grain harvest.
"You are still going to get grain down the broad gauge, they will spend $23m to do what needs to be done, but it will basically be the status quo," he said.
"No-one wants to stop grain moving, at harvest time."
Rail Freight Alliance (RFA) chair Councillor Glenn Milne said rumours of budget overruns were widespread, although the government continued to deny there were problems.
The RFA first raised concerns with Ms Allan at its June conference, last year.
"Rumours of budget overruns have been widespread," Cr Milne said.
"Minister Allan presented at our conference last year and said none of these rumours was true and she felt like she was playing 'Wacka Mole' against such rumours."
The project was broken into five sections and due for completion before the end of 2018.
"After a comprehensive study, two business plans and the sale of Rural Finance Corporation to fund part of the project, this is what we are left with," he said.
Poorly scoped, mismanaged and poorly constructed, what promised so much for Victoria was now a complete mess.
"A half-done project, leaving freight paths compromised and the work that has been done to date has left the track in a worse state than before," he said
"It leaves me to wonder, what is the future for Victorian exports and our regions, this project was entrusted to Minister Allan, and she has failed to deliver.
This project was to be a game changer and bring prosperity to the regions - once again rural Victoria has been hung out to dry."
Cr Milne said the RFA met with Freight and Ports Minister Melissa Horne last week, raising funding and project concerns with her.
"Now is time for Minister Horne to fight for the future of rail freight and get this project the funding it needs to be completed and repair the substandard works that have been done to date," he said.