The Prime Minister says the Government has no plans to sell KiwiRail.
KiwiRail is considering cutting between 170 and 220 jobs by October this year, saying it needs to reduce expenditure by $200 million in its Infrastructure and Engineering Department in the next three years.
In a consultation document obtained by New Zealand First, the state-owned enterprise says the move could save it about $14 million a year in wages. Transport spokesperson Brendan Horan says it is also planning for a further 100 jobs to go by the end of 2013.
Labour's State Owned Enterprises spokesperson Clayton Cosgrove says the proposed job cuts are further evidence that the Government is softening up the public for the eventual sale of the company.
However, Prime Minister John Key said on Tuesday the job cuts are an operational matter for KiwiRail's management and the asset is not being prepared for sale.
"The Government has no plans to sell KiwiRail - it's highly sceptical it could even sell KiwiRail.
"New Zealanders will remember that (former Labour prime minister) Helen Clark paid a huge amount of money to buy KiwiRail. Immediately after buying it, hundreds of millions of dollars were written off.
"We've now invested billions of dollars and, with the best of intentions in the world, it's not making money."
Mr Key says it is up to the management to make the right decisions to make the business profitable and the Government will not intervene.
Green Party co-leader Russel Norman says the Government's transport policy is to blame. Dr Norman says it is directing vast sums of money at new motorways and under-funding investment in rail.
The Labour Party says cutting jobs is false economy and the Government should put more capital into KiwiRail because it is an important asset.
Meeting held with workers
KiwiRail has been holding meetings with employees throughout New Zealand, with the final meeting to be held in Invercargill on Friday.
The company says it is operating in tough trading conditions, compounded by the Canterbury earthquakes, and the proposed changes will help it achieve financial sustainability by 2020.
The Rail and Maritime Transport Union says its members are angry and shocked.
The Council of Trade Unions says the plan is reckless and will compromise passenger safety and create uncertainty for freight companies.
CTU president Helen Kelly says employment should be being created, not wiped out.