Victoria will fund the rectification of privately owned buildings with combustible cladding, a move that could cost billions of dollars and makes it the first state to take a step industry commentators said was inevitable.

The state government on Tuesday will announce the plan to enable rectification upfront and then seek damages from responsible parties.

A new body, Cladding Safety Victoria, will oversee the process, rather than the Victorian Building Authority building industry regulator. Further details were not immediately clear late on Monday. A spokeswoman for Planning Minister Richard Wynne declined to comment.

The decision follows comments by Premier Daniel Andrews last month that the state would put taxpayers' money into funding the replacement of flammable panels, in an admission that an earlier bid to let apartment owners fix their cladding and pay it off through their local rates had failed.

While the combustible panels, now the subject of two separate class actions against manufacturers and suppliers, have been used across the country since the 1990s, Victoria has the largest number of known private buildings with them. Mr Wynne last month told a state parliamentary committee the number of affected buildings was more than 900.