But the warning will not stop the project going ahead, with Infrastructure Minister Michael McCormack telling The Border Mail it is still a government priority.

In a damning report, the federal government organisation concluded the Australian Rail Track Corporation's business case showed costs would be higher than the benefits to the community, which were "materially overestimated".

"There are also key risks for the delivery phase of the project that could lead to cost overruns," the report stated.

After also finding the cost of problems on the North East rail line were regionally but not nationally significant, the project will not be included on the organisation's infrastructure priority list.

Infrastructure Australia chief executive Romilly Madew said the conclusion was reached by an independent advisor after a rigorous assessment process.

"We know compared to other regional Victorian passenger lines, there is relatively poor punctuality, and reliability on the North East rail line," she said.

"However, based on the current evidence available, the cost of the project would significantly outweigh its benefits."

IN OTHER NEWS:

Infrastructure Australia has been slammed by state and federal politicians and Border Rail Action Group for having a lack of understanding of the issues that train commuters have to face.

The rail upgrade has a total federal funding allocation of $235 million, but the ARTC business case is for $198.3 million in works.

"The North East rail line upgrade is a priority for the Australian government," Mr McCormack said.

"In late 2019, the ARTC awarded the main construction contract to John Holland and major North East rail line upgrade works will proceed as planned in 2020."

The government also contacted organisations like Business Wodonga on Wednesday, after being sent questions by The Border Mail, and ensured them the track upgrades would still go ahead.

Border Rail Action Group chairman Bill Traill described the assessment as strange and unprofessional, but ultimately insignificant, and had no worries about the works going ahead.

"The strangeness of it is in its timing, which is a matter of days - and I don't exaggerate - before the contract with John Holland is going to be implemented for the upgrade of the track," he said.

"They've actually quite reasonably concluded that the upgrade won't offer very much if at all in the matters of faster schedule of trains."

He said Infrastructure Australia did not consider that times would improve with new VLocity trains, nor the benefits for the freight network.

Indi MP Helen Haines said it was important for Infrastructure Australia scrutinise the spending of public money, but did not agree with its conclusions this time.

"I do not believe the position put forward by Infrastructure Australia fully accounts for the many non-monetary benefits the rail line upgrade will bring. One of these is that rail is accessible to almost everyone," she said.

"I believe the North East rail line upgrade is a sensible and proper use of public funds that will bring many benefits to our region, consistent with core principles of accountability and integrity in politics."

A Victorian government spokeswoman said the report would not stop federal and state governments getting on with the important project.

"Sydney-based Infrastructure Australia's decision not to include the North East line upgrade project on its list of infrastructure priorities, is incredibly disappointing," she said.

"Infrastructure Australia's evaluation of the business case shows once again a lack of understanding about the objectives of the North East line upgrade which will provide passengers with a more comfortable and reliable service."