A tram line to Port Adelaide could be in doubt after the South Australian Government announced a $238-million tender to upgrade the rail line to separate Adelaide's Outer Harbor passenger line from the freight route.

The joint Commonwealth and state-funded project will see a rail underpass built for the passenger line to ease congestion for freight carriers and reduce traffic bottlenecks along Park Terrace and Torrens road.

But the announcement raises questions about plans to replace diesel trains to Outer Harbor with a tram line to Port Adelaide, as outlined in the Government's integrated transport plan.

Transport Minister Stephen Mullighan said the upgrade would give the existing line light rail capabilities.

"We'll be constructing the Torrens Junction project so that it can accommodate not just both diesel and electric trains but trams as well," he said.

"This will provide and exciting opportunity to make sure we're delivering the best possible transport upgrade for the Outer Harbor line whether that's electric trains or trams into the future.

"We've already announced that we'll be funding a $4 million study to make sure we can take trams out into our suburbs."

The tender process is expected to last a few months, with construction set to be completed by 2018.

Mr Mullighan said the project would create up to 200 jobs, and companies committed to maximising their use of South Australian products would be favoured.