It comes as the volume of freight delivered to the Port of Melbourne by rail has dropped to 6 per cent, down from 14 pc in 2013-14.

SCT Ports and Government Relations general manager Matt Eryurek said this season, the company would move only 14,000 TEUs (twenty-foot equivalent containers) from its intermodal at Dooen, near Horsham.

The effectiveness of the scheme had been eroded with the use of high performance vehicles seeing a shift of freight volumes back to road.

"If the Victorian Government had not extended the scheme (for 12 months in this year's budget), current rail operator recipients would be forced to pass on the difference of the MSIS rebate - between $80-$160 per cargo container - to Victorian farmers, manufacturers, and producers," Mr Eryurek said.

"Based on market intelligence, due to business loss, the government would need to commit its yearly investment to $8M to help shift the volume back onto rail."

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He thanked the government for continuing to support the MSIS but said the $4m it provided was a 'minimum'.

Farmers, manufactures and producers were already highly sensitive to additional cost increases, due to the COVID-19 pandemic and current geopolitical trade tensions with China.

"The scheme needs to be readjusted to help shift, rather than retain, freight on rail," he said

"Like the Tasmanian equalisation scheme designed to keep exports flowing it is imperative that MSIS is committed to for five years and a long term policy framework ensured."

Another recipient of MSIS, Warrnambool's WestVic Container Export managing director Warwick Loft, said there was little encouragement to shift freight to rail.

"The Mode Shift Incentive Scheme has always been under threat, no-one can operate under threat," Mr Lofts said.

"It's either got to be bedded down and it's there - if it's not, all freight will be going by road,"

He said road transport operators needed to pay more, to compensate for the damage their vehicles did.

"The roads are just falling apart - even new roads are falling apart, they just can't handle it.

"We share the line with passenger trains, that's fair, but we are treated like a poor cousin."

The value of the MSIS had been eroded, since its introduction.

"I can't remember rates on my property here ever going down, I can't remember paying for power that's ever gone down - everything has gone up."

A state government spokesperson said work on the Port Rail Shuttle and the PRTP would take trucks off local roads and reduce last-mile costs for farmers and rail freight users.

"Delivery for the Port Rail Shuttle Network is well underway - with the three terminals expected to open progressively from late 2022," the spokesperson said.

"The project will drive a major shift of freight volumes onto rail, reducing congestion, emissions and improving safety."

An investment case had been developed for a new intermodal freight terminal for Melbourne.

The drought had been a significant contributor to low rail volumes in recent years.

Rail terminals in southern NSW that usually used rail had been particularly hard hit, ultimately impacting the MSIS.

But forecasts for rail freight showed volumes should improve significantly since the last harvest.

A Federal government spokesperson said further planning, design, development and delivery of a Melbourne intermodal terminal was currently underway, with Victorian authorities.

There were two potential sites earmarked for the terminal, at Truganina and Beveridge; both connect to Inland Rail.

The Federal government has committed $2.1 billion to the project, contingent on a matching contribution from the state.

"A decision on the terminal location is subject to further planning and negotiations between the Australian and Victorian governments,' the spokesman said.

The government was also aware of industry and community concerns about the state of the Maroona to Portland rail line and was willing to discuss options for addressing them with the state.

"Any future Commonwealth investments in key freight links in Victoria will be considered in the context of the Budget process."