The Waverley Line was closed in 1969

Transport Minister Nicol Stephen stated the Scottish Executive's support at a committee meeting in Galashiels.

He said it would pay most of the cost of bringing the link back into use after almost four decades, although the project must meet certain conditions.

But the Scottish National Party and the Greens said he had left a �36m funding gap which would be hard to fill.

It has been estimated that it would cost about �150m to get trains running on the track again, up by �20m on the previous projection.

We believe the Borders railway will transform travel opportunities from Midlothian and the Borders and will make a real contribution to sustainable travel Nicol Stephen Transport Minister

Any shortfall would have to be made up by promoters Scottish Borders Council and other sources, including private investment.

Giving evidence to the Waverley Rail Bill Committee on Monday, Mr Stephen said the executive would provide up to �115m towards the project.

This figure was based on the 2002 estimates, and would rise in line with inflation when the tendering process begins.

Mr Stephen argued that the service would help attract investment and encourage more young people to remain in the area.

He said: "We believe the Borders railway will transform travel opportunities from Midlothian and the Borders and will make a real contribution to sustainable travel.

Parliamentary approval

"It will provide a real boost to the economy of the Borders, Midlothian and south east Scotland as a whole."

The line will need full Scottish parliamentary approval to meet a target opening date of 2008.

The conditions attached to the executive's financial assistance included a need for the project's backers to come up with a "clear and comprehensive strategy" for managing the cost.

The assumptions in the business case for the project - which include customer levels and housing growth projections - must also hold good.

The Midlothian Labour MSP, Rhona Brankin, welcomed the announcement. The line would benefit the economy by creating jobs and boosting local tourism.

"It goes without saying that transferring hundreds of thousands of car journeys a year to rail would also have tremendous environmental benefits," she added.

We're in danger of being sold a dummy by the Lib Dem minister and his colleagues Chris Ballance Green transport spokesman

The Greens welcomed the executive's support for the project but questioned the level of funding.

Transport spokesman Chris Ballance said: "Executive support for the Galashiels rail link has come not a moment too soon.

"That this funding falls short whilst major new roads are simply waived through, however, speaks volumes about the executive's priorities in transport.

"We're in danger of being sold a dummy by the Lib Dem minister and his colleagues."

SNP MSP Christine Grahame said councils could not afford to come up with the �36m which was still to be found.

'Isolated and uncertain'

She said ministers appeared to be giving the project the green light "in the full knowledge that their contribution is not enough to proceed with reinstatement".

"There are no substantive additional resources left to tap," she said.

"It is classic smoke and mirrors from the Lib Dem/Labour executive and leaves Borderers once again isolated and uncertain about what the future holds for their region."

Christine Grahame has raised funding concerns

South of Scotland Tory MSP David Mundell said: "I am pleased to finally see some progress on securing funding for the Borders railway after so many false dawns and announcements after announcements."

But he warned: "It would be unacceptable if any positive impact that the railway will bring could be offset by the financial burden of its construction being dumped on local taxpayers."

Borders Lib Dem MSP Jeremy Purvis said it was "a historic day" for those involved in the project.

"This announcement cements the commitment of the executive on this project and can mean that, with parliamentary approval, we can turn our focus to the delivery of the railway," he said.

The line will run 35 miles (56km) from Edinburgh to south of Galashiels.

The Waverley railway, which closed in 1969, had continued on through the Borders to Carlisle.

Full length

Campaigners hope to see the line from Tweedbank, near Galashiels, to Edinburgh, reopen by 2008.

The proposed route includes plans for new stations at Shawfair, Eskbank, Newtongrange, Gorebridge and Galashiels

Supporters hope the line will eventually be reinstated to its full length.