The Yarra Valley Railway is a multi-million dollar, decade-long project in Victoria, to restore a heritage railway and begin a tourist train.

The president of Yarra Valley Railways, Brett Whelan, told the inquiry that between 500 and 550 volunteers from 10 different community groups had put 70,000 volunteer hours a year into the project, every year since 2009.

They now have a popular tourist train running for 15 minutes each way on four of a planned 13 kilometres of track, the result of the volunteers completely rebuilding the train line.

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"There's not a sleeper that we're keeping; there's only one structure (at Healesville) that we're not entirely rebuilding," he said.

"We do have skilled workers, but in almost every case they've been using those skills as volunteers in their own time.

"It was a very small, step-by-step business plan, working with local businesses and local communities."

However, Damian McCrohan, president of Rail Trails Australia, used the project as an example of the sheer enormity of such an undertaking.

He said that after 10 years, $3 million in federal funding, and tens of thousands of volunteers hours, the group had only four kilometres of restored track, not even half of the planned project.

"Where are you going to get hundreds of volunteers from in the [North-East] area for the time required?" he said.

Three examples of failed multi-million dollar heritage railway attempts were also raised at the inquiry, one in Tasmania, one in Queensland, and one in Victoria.

MLC Ivan Dean asked why it was necessary to rip up existing rail lines to put in a bike path: "You can put a cycle trail anywhere, but you can't put a heritage train anywhere," he said.

The inquiry will decide whether there will be a heritage train, a walking and cycle path, or both, along the disused rail line between Lilydale and Scottsdale.

At the Tuesday, April 16 sitting, it also heard from the Office of Rail Regulation.

CLARIFICATION: The $3 million in federal funding the Yarra Valley Railway received has gone towards the total restoration of the 16 kilometre track, not only the four currently operational kilometres.

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