Amid open warfare within the NSW Nationals following the backlash in the Orange byelection at the weekend, the government said it would use funds raised from the $16 billion sale of Ausgrid and so-called value capture to pay for the project, intended to relieve mounting pressure on Sydney's overcrowded Western Line.

The new rail line will run driverless, single-deck trains and include new stations at Olympic Park and the Bays Precinct around Rozelle.

Premier Mike Baird said the government wants construction to start on the new line within five years and for it to be operating in the second half of the next decade.

But he was short on releasing details about the cost, the exact route or how many stations would be built. Those aspects would be subject to talks with industry and the wider community, and a business case for the project.

"We know where the rail link is going to go. What we need to finalise now is both the route, the number of stations and that is one of the great things we have through this – the opportunity to engage," he said.

"We're very confident that we have every capacity to deliver this project."

Mr Baird said the Ausgrid deal had given the government the ability to bring forward planning for the project, which was first revealed by Fairfax Media in September.

"A metro line in Western Sydney will effectively double rail capacity between Parramatta and the Sydney CBD," he said.

"This is the first step – we've identified the need for this project, we're committing the government to delivering it and today we begin the work to bring metro rail to Western Sydney," he said.

Called "Sydney Metro West", much of the new line will run through tunnels. The route follows a similar abandoned scheme promised by the former Morris Iemma Labor government in 2007 and then abandoned.

The first stage of a $20 billion metro line under construction at present, between Sydney's north-west and Chatswood, is due for completion in 2019. The second stage of this line will continue onto the CBD, Sydenham and on the existing Bankstown Line and should open in 2023.

Transport Minister Andrew Constance said the new west metro line to Parramatta would complement the existing Western Line, which was quickly reaching capacity.

"The growth in western Sydney means we have no choice. You're not going to be able to get people onto trains in 15 years if we don't start the firing gun," he said.

The new metro project will dovetail with the planned 22-kilometre light rail line from Westmead and Parramatta to Olympic Park and Strathfield. The light rail line is likely to be built in stages from 2019 at a cost of more than $3.5 billion.

Mr Constance said the new metro link and the Parramatta light rail line were "two very different transport projects".

"Light rail is about connecting precincts – this project is obviously a mass-transit solution which is going to lead to connectivity between Parramatta and the CBD," he said.

David Borger, the western Sydney director of the Sydney Business Chamber, said a metro line between the CBD and Parramatta was the "missing piece of Sydney's transport puzzle" and would re-energise the city's west, including Olympic Park.

"The Western Line is old, slow and congested. [The new line] will provide a significant incentive to the private sector to think about locating jobs in Parramatta ... and Olympic Park will boom [because of the rail project]," he said.

Mr Borger said the planned metro line would require the construction of a new station at Parramatta, the best location for which was now occupied by a council-owned car park north of Parramatta Square.

Deputy Opposition Leader Michael Daley described the government's announcement as a "desperate attempt to talk about anything other than the mauling they received in Orange" in the byelection at the weekend.

"It really is the mother of all distractions. There is no details, there is no designs, there is no dollars. No one can say where the stations will be going," he said.

A consortium of property developers has already submitted to government an unsolicited proposal for a metro-style rail line from Central to Westmead in western Sydney via Strathfield, Olympic Park, Camellia and Parramatta.

Christopher Brown, the chairman of lobby group Western Sydney Leadership Dialogue, said a number of private-sector infrastructure groups were eager to become involved in the government's new metro line.

And he called on the government to investigate a public-private funding model to fast-track the new line and reduce the burden on taxpayers.