Victoria's auditor-general has a revealed the state’s regional rail service V/Line is failing to meet performance targets and has an enormous maintenance backlog.

The AG’s new report says V/Line is struggling under a $535 million maintenance backlog.

Patronage on V/Line trains and buses has grown by close to 90 per cent over the last decade, leaving more and more commuters facing delays, cancellations and overcrowding.

“V/Line's performance over the past 10 years has mostly fallen short of its targets and community expectations, despite infrastructure improvements and timetable changes,” the report said.

The auditor-general found vehicles had been on the rails for 60 years - double their design life.

“The scale of funding required to address the maintenance backlog is significant - approximately $534.8 million across the entire V/Line network,” the report said.

From July 2013 to March 2017, V/Line missed 47 per cent of its performance targets.

The report said V/Line should not be measuring reliability and punctuality against a daily schedule, rather than the master timetable.

The report found that seats ran out on over half of all peak services on the Geelong line in the nine months to March.

When V/Line was forced to replace 350 trains with buses in 2016, it spent an average of $300,000 a day for several weeks, which resulted in the loss of about 600,000 passengers that financial year.

The AG says it lost about $2 million a week in fare revenue due to free travel offered by the Government in compensation.

“V/Line has not successfully dealt with the challenges it has faced over the past decade,” the report said.

“However, it has recently started to turn this situation around and is now better informed about the risks and challenges facing its operations.

“V/Line was not prepared for the strong growth in patronage and the resulting increase in service demand following the opening of the RRL [Regional Rail Link], which fundamentally changed the nature of its operations.”

The auditor-general called on V/Line to strengthen its monitoring processes so that more trains run on time, while also improving its system for analysing performance.