A project that could take thousands of trucks off inner-west streets has been left languishing while the state government pursues its privatisation of Melbourne’s port.

The $58 million Port Rail Shuttle proposes shifting freight between Swanson Dock and three inland container terminals, and has been in the pipeline since 2007.

The freight rail shuttle could take an estimated 3500 trucks each day off city roads.

Despite already accepting $38 million in federal government funds and allocating $20 million from its own 2014-15 budget for the shuttle, the state government has effectively abandoned the project while it tries to privatise the Port of Melbourne.

Western suburbs Greens MP Colleen Hartland has slammed both current and previous governments over the delay.

“The Labor government has a cheap and quick solution to remove more than half the trucks from our local streets, and they have dumped it,” she said.

Ms Hartland last week told Parliament the people of Yarraville and Footscray put up with pollution, noise and road safety risks from thousands of port-bound container trucks on a daily basis.

“It’s an absolute outrage that the Labor government is willing to consider making motorists and governments pay $5.5 billion for the Western Distributor proposal, when there is a far more affordable and effective solution available.”

A spokesman for Roads and Ports Minister Luke Donnellan said the government still supported a freight rail proposal at the port.

“The Port Rail Shuttle is one concept that may lead to improved rail modal share at the Port of Melbourne, but there are a range of other potential initiatives,” he said.

“The government will pursue these in conjunction with the Port of Melbourne lease transaction.”

The successful bidder would be required to protect rail corridors inside the port and consider rail options during its lease term.

Victoria University logistics expert Hermione Parsons warns port privatisation could leave taxpayers facing an expensive compensation bill.

Ms Parsons on Monday told Victoria University’s Port Privatisation in Australia forum that container capacity at the Port of Melbourne would be reached in the next 20 years.

“Currently, the privatisation proposal exposes Victorians to a massive compensation payout if a second container port is developed in the next 50 years,” Ms Parsons said.

Public hearings into the proposed lease of the Port of Melbourne began yesterday and continue today.