Wales has been given the opportunity to renationalise railways after Westminster handed control of a rail franchise to the Welsh government yesterday.

Control over the Wales and the Borders rail franchise will be devolved, so that the Welsh government chooses an operator after Arriva Trains Wales’s contract runs out in 2018.

But it is not yet clear if the Welsh government will renationalise the service, or award the franchise to a private operator.

Plaid Cymru shadow economy and transport minister, Rhun ap Iorwerth AM said: “For the first time, Wales will be able to choose who operates its own railway. This is something that our party has underlined the importance of for several years. 

“The current and next Welsh governments now have an enormous challenge in planning and delivering the next franchise, but this is a challenge that we know can be reached.”

The government has also backed down in a row over funding for the electrification of the rail network in south Wales.

It will cough up £125 million towards electrification of Valley Lines rail operations in south Wales, and pay £105m towards the cost of electrification of the Great Western service linking south Wales with London.

Mr ap Iorwerth called for work on the electrification project to begin as soon as possible.

He said: “Previous secretaries of state appeared to want Wales to pay the full cost of Valley Lines electrification. They have rowed back on this and have reached a deal.

“The deal itself is a good step in the right direction but it still appears to leave control of rail infrastructure in the hands of Westminster. We would prefer to see both franchising and infrastructure in Welsh hands so that they can be planned together, and will continue to press on that issue.”

Labour shadow Welsh secretary Owen Smith said Prime Minister David Cameron has been “doing the hokey-cokey” on funding the Welsh railways for over a year.

Welsh First Minister Carwyn Jones added: “Together with an agreement to fully devolve power over the Welsh rail franchise, this will allow the Welsh government to move forward with its ambitious plans to create the efficient and reliable rail service Wales needs and deserves.”