The council may dump altogether plans for underground services beneath market sheds A to D as it had planned.

It will spend around six months coming up with a new plan to accommodate hundreds of car parking spaces it must provide under an agreement struck with the Victorian government in 2013.

Under that deal, the council will build new parkland on the site of the current open air car parking lot next to the market.

But in return for other state-owned land next to the market being given to it, the council must provide an equal amount of car parking elsewhere.

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It had been relying on putting car parking underneath the refurbished heritage sheds.

That agreement, struck by former premier Denis Napthine and former lord mayor Robert Doyle, concludes in 2019 – but it is now being renegotiated by the council and Andrews government because of the delays.

The council wants to redevelop the market to ensure it provides a brighter future for the produce and retail centre – which because of apartment development on its doorsteps will have an extra 22,000 residents living nearby within half a decade.

Acting lord mayor Arron Wood said he was very disappointed that the council could not proceed with its original plans for the market.

"I can't fathom the fact that you can't dismantle some pretty basic construction like those sheds and refurbish them and return them in a much better state," said Cr Wood.

He had initially reacted with anger at the Heritage Victoria ruling, pledging to challenge it.

He said he had "gone through the five stages [of grief] here and spent a fair bit of time and anger", but was now reconciled to revamping the council's plans for the market.

A report will go to a Melbourne City Council committee on Tuesday, with a recommendation to councillors that they approve starting over on plans for the market sheds.

Planning Minister Richard Wynne is expected to soon release his decision on a separate project tied to the Queen Victoria Market renewal, a 42-storey apartment tower and community centre to be co-developed by the city council and property group PDG.

The Age asked Mr Wynne his views on the council's rethink of its current plans for underground services beneath the heritage sheds.

"We’ve been very clear that any development of the market will have to respect and preserve the rich character and heritage that makes it what it is," Mr Wynne said.

"Heritage Victoria will not allow any development that puts heritage at risk, but they are working closely with [Melbourne City Council] on a way forward," he said.