A coalition of local councils is demanding the state government introduce a reward program for collecting bottles and containers as a way of fixing the state's ailing recycling system.

Melbourne City Council is among those calling for a container deposit scheme after it was forced to dump tonnes of recycling material in landfill due to the closure of one of Victoria’s biggest recycling companies.

Victoria is resisting calls to introduce a container deposit scheme.

On Friday the Supreme Court ordered recycling giant SKM to be wound up after it was unable to show it could repay debts of more than $5 million.

The company processed recycling material for more than 30 councils, including the City of Melbourne which is now dumping more than 45 tonnes of recycling in landfill every day.