The UK Department for Transport (DfT) has set out initial proposals for the future of the Island Line as part of next South Western rail franchise.
Later this year, the DfT will consult with passengers and the public on its plans for the South Western franchise.
Island Line, which runs on the Isle of Wight, is part of the current South Western franchise, which is scheduled to start in 2017.
The government is currently drawing up detailed plans for the next franchise, which covers the route between London, Surrey, Hampshire and Dorset.
The DfT is scheduled to launch a formal consultation later this year.
The plans are designed to deliver the services that local people need, while putting the line on a more sustainable footing for the future.
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By GlobalDataUnder the proposals, bidders for the next franchise will be asked to develop proposals to reduce costs, which could involve securing an investment partner or setting up a social enterprise to take over running of the line.
Network Rail will be responsible for maintaining and upgrading the infrastructure of the line.
According to DfT, the line currently costs £4m a year to run, against an income of £1m.
The government has also given its backing to a task force, which will be set up by Isle of Wight Council to examine the future of transport across the island.
UK Rail Minister Claire Perry said: "I am determined that residents, employers and tourists on the Isle of Wight will continue to benefit from the service that the Island Line provides.
"We know that the line is expensive to run and in the current financial climate we need to find ways to bring down the cost to taxpayers, while ensuring that the line continues to meet the needs of the community.
"Giving local people more say over these services is the best way to make this happen. That is why I want to see stakeholders work with the next operator to come up with innovative solutions that will reduce the burden on the public purse, while safeguarding the line for years to come."
Operated by South West Trains, the Island Line services operate a 13.7km route from Ryde Pier Head to Brading, Sandown, Lake and Shanklin using former London Underground (LU) tube trains.
In August, Isle of Wight Council has met with officials from the DfT to discuss the government’s plans for the South West Trains franchise and the future of Island Line.
The DfT has confirmed that an Isle of Wight train service will be included in the next South West Trains franchise.
According to the Isle of Wight Council, the DfT were keen to understand the community needs for Island Line and will look forward to seeing the options appraisal report by Atkins, commissioned last week.
Image: Island Line is part of the current South Western franchise, which is scheduled to start in 2017. Photo: courtesy of Isle of Wight Council.