Transport Minister Steven Joyce says a number of options for rail are being considered, including the closure or mothballing of some small provincial lines.
Mr Joyce says the Government is looking at how to improve the state of KiwiRail's books.
The Government has been warned that KiwiRail is likely to need more money to keep it commercially viable.
Mr Joyce says options include the closure of some small lines that have little or no business, including Gisborne and northern Wairarapa, both of which are struggling.
He says any closures would have to be handled carefully, to avoid loading fixed costs onto other lines.
Mr Joyce told Morning Report he's considering what he calls the mothballing of some rail lines.
He said it might be cheaper to mothball them instead of closing them.
Mr Joyce said mothballing the lines would mean keeping them in a state that they are able to be reopened, but don't carry trains.
He said if for example, the Napier Gisborne line is mothballed, then Kiwirail could be able to secure a client over time to make that line worthwhile, instead of leaving it open now to incur costs.
Labour says the Government appears to want KiwiRail to fail.
Transport spokesman Darren Hughes says KiwiRail's previous owner Toll also planned to close regional lines, which was one of the reasons the Labour Government bought it.
Mr Hughes says the Government does not have rail as one of its top priorities in its new infrastructure plan and that it constantly gives the impression of wanting to see KiwiRail fail.