The Tasmanian Government says it can not guarantee a future for the West Coast Wilderness Railway beyond its closure in April.
The Federal Group is closing the major tourism drawcard after a decade of operation.
About $20 million needs to be spent on the line which is owned by the State Government.
Tourism operators want taxpayers to fund the railway's revival.
Infrastructure Minister David O'Byrne says public money may be used if it is viable, but the Government can not guarantee its future.
Mr O'Byrne says state, federal and local governments could raise the money so a new operator can step in.
"This asset was built by three tiers of government and the community and that's how we're going to work through with it," he said.
"It really does depend on the business model."
He says the Federal Group was only obliged to do general maintenance, suggesting the Government is responsible for major upgrades.
"We alone can't fund this sort of capital expenditure."
Mr O'Byrne says he will not speculate on why there is no penalty in the lease for early termination
The Tasmanian Opposition opposes a state taxpayer-funded bailout to revive the railway.
Liberal leader Will Hodgman says Commonwealth funding would be welcome, but the State Government should spend its money on marketing for the whole tourism industry.
"It's not government's business to run business, it's government's responsibility to support business."
The Government says TasRail will not take over the railway because it only handles freight.
West Coast Mayor Darryl Gerrity is organising a public meeting in Queenstown on Thursday and hopes a committee will be formed to discuss options for the railway's revival.
"But all this has got to happen very quickly because the end is drawing near and if it does cease that could be for a period of time that would make it difficult and expensive to get going again."
The Tourism Council's Simon Currant says it is worrying that no guarantees have been made about its future.
"That's why we believe, and our board decided, that's what we have to do is to convince them that we've got to continue to run it and help them with the solutions."
One of the business owners relying on the attraction signed a lease to run the railway's cafe in September.
Joy Chappell believes the State Government has an obligation to help financially.
"I want to see them put some money into their, the property that they own that belongs to all of us and take a bit of responsibility you know, just wake up to yourselves."