Building a $50 million government-owned recycling centre would enable processing of half the plastics gathered in Victoria, according to a radical proposal to combat the recycling crisis.

The plan to dramatically increase the state's recycling capacity comes as local councils begin sending tonnes of household recyclable material to landfill after major processor SKM suddenly shut its doors last week.

Single-use plastic bags are an environmental hazard. Credit:AAP

A Parliamentary Budget Office analysis shows that the proposed plastics recycling plant would cost $52 million to establish but would bring a net gain of $166 million over the decade to 2029-30.

The Victorian Greens commissioned the analysis for the project, which would employ 130 people in ongoing positions and process waste for councils and businesses.