After months of wrangling, the Andrews government claims to have hit a brick wall, issuing the State Opposition with a blunt ultimatum: pass the deal by Thursday or Australia's largest container port will be sold without legislation using special powers introduced by the former Kennett government.

The bold move means Labor would be unable to offer potential buyers the comfort of a bipartisan legislative agreement, creating an added layer of legal uncertainty for an already jittery market.

Treasurer Tim Pallas said negotiations to pass the legislation through State Parliament's upper house – where Labor is seven votes short of a majority – had hit dead end after weeks of "frustrating" talks with the Opposition.

He conceded bypassing the parliament would – all things being equal – undermine the sale price. But he predicted this would be offset by the reintroduction of various sweeteners previously off the table – including a controversial clause making a future government liable to pay compensation to the buyer if rival port undercuts its business within the next 50 years.

"This process of engagement has to come to an end," Mr Pallas told Fairfax Media. "They (the Opposition) are proposing a ridiculous compensation regime that would strip value for no good reason out of the transaction and we are not going to agree to that."

In an added complication, bypassing the parliament would mean the sale would be very unlikely to take place this year, potentially throwing State Treasury's budget predictions out of alignment by billions of dollars.

Both sides of politics announced plans to sell the port in the lead-up to the 2014 state election, with an estimated $5.3 billion from the transaction factored into the budget by the former Coalition government just months before it lost government.

The Andrews government, which hopes to snare at least $6 billion from the sale, has promised to use the money to pay for its plan to eliminate 50 level crossings over two terms.

Victoria has also been banking on about $900 million from the federal government's asset-recycling scheme, offering the states 15 per cent of any asset sale as a bonus payment for new infrastructure. Further delays could put this at risk, with the scheme likely to end within the next two years.

Shadow Treasurer Michael O'Brien said a decision to lease the port without legislation would be legally questionable, wiping billions of dollars from the sale price and making the state a laughing stock.

"The Coalition has offered a reasonable way forward which industry agrees with," Mr O'Brien said. "By contrast, no one agrees with Daniel Andrews' reckless position."

Labor hopes the demise of negotiations could see the opposition come under pressure from the business community, which has argued for months the sale is needed to finance future infrastructure. Also under a cloud is a promise by Labor to devote 10 per cent of the lease proceeds to rural and regional infrastructure, as well as a plan for a port rail shuttle.

A key business adviser closely involved in the negotiations said there was no doubt bypassing the parliament would undermine the price, but he said he believed the financial hit could be minimised by strong contractual arrangements between the buyer and the state.

"There is a very big pool of capacity chasing this," he said. "You couldn't pick a better time."

Almost 50 pages of correspondence between the government and the opposition – seen by Fairfax Media – shows both sides have yielded ground since negotiations started late last year  but the compensation clause remains an apparently insurmountable sticking point.

Infrastructure Partnerships Australia chief executive Brendan Lyon said the port lease had been scrutinised, debated and contemplated to within an inch of its life and it was time to end the "heavy politicisation of infrastructure". "Victoria needs the money for infrastructure, and Victorians need the lease done well to win back investor confidence," Mr Lyon said.