Victorian Ports and Freight Minister Melissa Horne has flagged the end of a funding scheme, aimed at shifting freight from road to rail.
The government put further a forward $3.6 million towards the Mode Shift Incentive Scheme in this year's state budget.
Under the scheme, four freight operators receive incentives to move up to a combined 42,500 containers by rail, taking the equivalent of 28,000 truck trips every year off regional and urban roads.
Speaking at the Public Accounts and Estimates Committee, Ms Horne said the MSIS was a "vital" programme that supported the behavioural change behind shifting freight from road to rail.
"We know its importance with the freight task growing so much," Ms Horne said.
But, under questioning from Liberal MP for Polwarth Richard Riordan, Ms Horne admitted the government was intending to phase out the MSIS.
She said intermodal hubs, the rail freight shuttle service and Port of Melbourne on-dock Port Rail Transformation Project would eventually replace the MSIS.
"We will get to the point where the MSIS - because it is an incentive for primary producers to shift their containers onto rail - isn't actually required any more, because the infrastructure will be in place," Ms Horne said.
"We have the freight task growing exponentially, we have a policy that is about shifting more of the task onto rail and this is just one of the levers we have happening.
"It is just one of those pieces, in the entire jigsaw."
She said it was intended to get port-rail shuttles up and running to coincide with the Port of Melbourne on-dock connection, due for completion in 2023.
"We are building this rail freight network, in and around Melbourne - this is something we are doing from the ground up," she said.
"Short haul rail freight is absolutely and opportunity to make a real difference to the way freight moves in and around Melbourne."
Ms Horne said project agreements had been signed with three terminal operators of the shuttle network, SCT, Altona, Austrak, Somerton, and Salta Properties, Dandenong South.
"Putting containers on rail will reduce truck movements around the port gate and cut the cost of the last mile, which disproportionally impacts our exporters," she said.
"We know intermodal terminals play a big part in the shift from road to rail and that's why we are working with the commonwealth to deliver terminals in the west and north."
"The further the freight travels, the greater the competitive advantage we have got of rail, over road.
"It produces less carbon, it's much more efficient, it's got lower crash rates and road accident costs are actually 20 times higher, for every tonne per kilometre of freight moved."
Ms Horne's claims 11 per cent of all freight was carried to the Port of Melbourne by rail were also challenged by Mr Riordan.
He questioned what he said was the government's real commitment to the MSIS.
"That was being funding to the tune of $5 million, you have dropped it to $4m and now to $3.6m," Mr Riordan said.
"That represents a 10 per cent year-on-year drop."
He said in 2013-14 the Australian Competition and Consumer Commission had found 14pc of freight was carried to the port by rail.
That had dropped to 7.5pc last financial year.
"The funding you are putting in doesn't seem to be getting more container traffic on rail."