Scottish ministers are running Scotland's train network

Ministers have been awarded �325m to fund the new powers, transferred from the Department of Transport.

First Minister Jack McConnell called it the most significant extension of devolution since the Scottish Parliament was formed in 1999.

Ministers can now determine strategies, manage the First ScotRail franchise and specify infrastructure needs.

The executive will also be able to set fares and fund improvements.

However, safety matters and the licensing of railway operators will remain "reserved" - the responsibility of Westminster.

Ministers in Scotland will also take control of spending by Network Rail, which is in charge of tracks and signals.

New body

The shake-up, which has been given cross-party backing, will also ensure that improvements at Edinburgh's Waverley station can go ahead.

The far-reaching new powers will be taken on by a new transport agency.

UK Transport Secretary Alistair Darling said last year he wanted more decisions on the railways to be devolved to Scotland and Wales.

From the ordinary customers' point of view I'm not sure they'll see a huge difference First ScotRail spokeswoman

The move was welcomed as "a good deal for Scotland" by the executive.

A spokeswoman for First ScotRail predicted on Monday that the handover would be smooth.

She said: "This means that the direction will come from the Scottish Executive, but that's been happening with us already in Scotland.

"We've been in contact with them in relation to funding, what kind of level of service we're operating, what new trains we're opening and what's being delivered."

She added: "From the ordinary customers' point of view I'm not sure they'll see a huge difference."

Scottish Greens transport spokesman Mark Ballard said: "This puts the reins in the hands of Scottish ministers, so now they have no excuse for not getting Scotland's railway system really moving."

Scottish Conservative transport spokesman David Davidson called on the executive to work in partnership with train operators evaluating the weaknesses in rail infrastructure.

"This will lay the groundwork for a commitment as early as possible on the many improvements that need to be made," he said.