The Interstate Commerce Commission turned down a proposal yesterday from a group of shippers and employes of the Milwaukee Road to take over ownership of the financially ailing railroad.

The commission said the proposal from a group calling itself the New Milwaukee Lines isn't feasible. It lacks adequate financing, wouldn't be fair and equitable to the Milwaukee estate, and wouldn't result in a railroad that could be operated on a selfsustaining basis, the ICC said.

Submitting the plan for the ICC's consideration was specifically authorized by the Milwaukee Railroad Restructuring Act, which was enacted in early November at the urging of western and northwestern legislators as a last-ditch attempt to save the western portion of the railroad that the Milwaukee had proposed abandoning.

Four months ago, the Milwaukee Road -- its full name is the Chicago, Milwaukee, St. Paul & Pacific Railroad -- had proposed abandoning service west of Miles City, Mont., a stretch of track it said had been a drain on earnings for years. Without the proposed abandonment, the line would run out of cash by Nov. 1, it said. The railroad has been in bankruptcy proceedings since December 1977.

The judge overseeing the bankruptcy said the lines could be abandoned, but quick action by Congress pumped several millions of dollars of emergency aid into the railroad to keep the trains rolling on the western lines. It also paved the way for "NewMil" to submit an employe-shipper ownership plan for the railroad to the ICC.

The proposed NewMil railroad would have extended about 3,550 miles from Louisville, Ky., to Seattle and Tacoma, Wash., and to Portland, Ore., via Chicago and the Twin Cities, thus saving the Miles City to Seattle portion the Milwaukee had proposed dropping.

In contrast to the NewMil plan, the Milwaukee and its court-appointed trustee, former Illinois governor Richard B. Ogilvie, want to reduce the current 9,500 miles of track to a 3,550-mile Midwest rail system.

The ICC said yesterday it supports the concept of rail competition across the northern tier states -- with the Milwaukee's planned abandonment of the western segment, the area would be served only by the Burlington Northern -- but found that the NewMil plan would not work.

Citing the plan's highly optimistic traffic projections, failure to account for inflation factors, and very low cost estimates, the commission said the cumulative impact of the problems raised "would be crushing to the new enterprise."

Although the commission said it tried to make allowances in its analysis for NewMil having only a short time to develop a plan, it said it had "an obligation to determine whether within reason the plan is feasible," and concluded "reluctantly" that it wasn't.

Although proponents of the plan possibly could obtain necessary financing, operating losses would be considerably larger than projected, the commission said, requiring at least an additional $500 million, with the sources of those funds uncertain.

The commission's decision was 7 to 0, with one member not participating.

The ICC's decision appears to clear the way for the Milwaukee to move ahead with its own court-blessed plan to cut back its system, including the western line that the employe-shipper group wanted to save.