FEDERAL Group will not renew its lease to run the West Coast Wilderness Railway despite $12 million being committed for maintenance and repairs.
The federal government announced yesterday that it would provide up to $6thmillion for urgent infrastructure upgrades if the state government also chipped in.
The state responded by offering up to $1.5 million a year for four years to cover ongoing maintenance costs.
Both commitments are contingent upon an operator being found to take over the railway once Federal Group leaves on April 30.
The tourism company broke its 20-year operational lease on February 4, citing hefty infrastructure costs.
Infrastructure Minister David O'Byrne said he could not see Federal Group stepping back into the picture.
Mr O'Byrne said the government had had discussions with a number of private operators interested in the heritage Abt railway, and now that the capital expenditure and ongoing funding was covered he expected more interest.
He said the government would not consider running the railway itself.
``We think ultimately it's a private operation,'' Mr O'Byrne said.
Tourism Industry Council of Tasmania chief executive Luke Martin said no one would have been interested in operating the railway if the infrastructure costs had not been covered.
Mr Martin said the next challenge was to increase visitor numbers to the region.
The state and federal governments spent $38 million getting the railway up and running in 2002.
It has contributed $10 million to the West Coast community and employs 33 people.
However, visitor numbers have never reached the promised 150,000 a year, and after peaking at 60,000 in 2003-2004, have stagnated at 30,000.
Labor Braddon MHR Sid Sidebottom said the railway was an essential part of attracting tourists to Queenstown, and its closure would have affected 150 businesses.
Mr Sidebottom said the announcement provided certainty to the community, but the government would not hand out money again if a sustainable business model was not found.
Liberal Braddon MHA Adam Brooks said the opposition welcomed the funding announcement.
However, he argued that the government should have announced the bail-out when it became aware of the engineering report commissioned by Federal Group, which listed the infrastructure problems, late last year.