Sydney's monorail is heading for the scrap heap.

The New South Wales Government has announced that it has bought Metro Transport Sydney (MTS), the company that owns the monorail and light rail, in a $19.8 million deal.

It is part of the plan to re-develop the Darling Harbour Convention Centre and precinct.

The Transport Minister Gladys Berejiklian says the monorail is in the way and it will be removed as soon as possible.

She says it is not integrated with Sydney's wider public transport network and has never been embraced by the public.

The plan is to replace it with an extension of the light rail network.

Ms Berejiklian says the deal allows flexibility when planning future transport options for the city.

"Our options have increased in relation to light rail. Our options have increased in relation to how we integrate the convention centre with other modes of public transport," she said.

"The monorail has been around for 20 years and many argue that its use by date has arrived, and that's certainly the government's position."

The Business Chamber and developer groups approve of the move, and so does Sydney's Lord Mayor Clover Moore.

"There needs to be a whole-of-city approach to transport and that includes how cars move around, how buses move around and how we plan for future light rail," she said.

"So that's all happening now, and I believe the action on the monorail is just part of that process."

Greens MP and Leichhardt councillor Jamie Parker says buying up the monorail paves the way for an improved light rail service.

"When I was the Mayor, and also as state MP, we were pushing to have the light rail made public so the public ticketing system could be introduced," he said.

"But who would have thought that it would be a Liberal government that would take this step?"

Former Sydney Mayor Frank Sartor was a councillor when the line was built and he says he too will be glad to see the monorail go, but is less enthusiastic about light rail.

"I support the Government buying it and removing it," he said.

"I support light rail to an extent, but I think Gladys is relying far too much on it. It's a short term fix."

The monorail was first opened in 1988 and is 3.6 kilometres long.

Metro Transport says over 3 million people use the monorail each year - more than half of those are visitors to Sydney.

The 15-minute loop takes in Darling Harbour as well as Chinatown and the Pitt Street retail area.

However, it has been criticised as too expensive - with a One Trip ticket costing $5.

In a statement, Metro Transport says it is "very disappointing" that the monorail's demise has been confirmed, however it is exciting that the government is "proceeding with the development of this important infrastructure project".

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