Victoria's Auditor-General says the state's handling of the Murray Basin Rail Project (MBRP) upgrade has been “deficient” and “inadequate”.

There has been strong criticism of the half-finished effort to upgrade western Victoria's Murray Basin freight corridor, which was announced six years ago.

Despite a massive government spend, hundreds of kilometres of rail track upgrades remain incomplete, beset by crippling weight and speed restrictions.

Additionally, the audit found the route to port from the north-west Victorian terminal at Yelta is now 128 kilometres longer than the original route.

A line has been reopened from Maryborough to Ararat, but the audit found it was rebuilt using legacy rail of the same quality as when the line was used in the 1990s.

Victoria’s regional rail agency V/Line has been singled out for “deficient project planning, cost estimation, and scoping” during the $440 million freight project.

A 2017 contract between the government, V/Line, and the McConnell Dowell and Martinus Rail venture, was hobbled by over 80 “variations, notices of delay, and extensions of time requests”.

“These claims heavily impacted V/Line's time, cost, and risk contingency baselines for the MBRP,” the report says.

The construction consortium pulled out after a workplace safety breach in 2018 and has stopped work on the project, leaving it incomplete.

The work will now be delivered by a group called Rail Projects Victoria, which is still working on its business case.

The Department of Transport was blamed for a lack of “due diligence” during the project, including backing a business case that included “over-optimistic expectations” about freight demand and “untested assumptions about the project's complexity”.

“These project planning expectations adversely affected project delivery [and] … led to engineering and construction difficulties,” the report said.

The Auditor-General called on the Government to expedite works to finish the project and “improve its contract management” with real performance indicators.

It also said significant new funding will be required to complete the project.