Addressing a conference with Prime Minister Mikhail Fradkov, head of Russian Railways Vladimir Yakunin, Transport Minister Igor Levitin and Economic Development and Trade Minister German Gref attending, Putin said the move would increase the rail monopoly's capitalization.
Putin said: "Russian Railways will be unable to mobilize the required amount of resources [for the reform] even if existing railway tariffs are adjusted."
The Russian leader also said that the rail monopoly should overcome the depreciation of its fixed assets and set up high-speed railroads.
The president said: "It is not only necessary to overcome the increasing depreciation of fixed assets, which is a major problem with current depreciation standing at about 60%, but also to establish a new network of high-speed railroads in Russia."
Putin said: "This will involve significant investment in the sector. I am talking about considerable funding."
"We should attract private capital and promote broader use of mechanisms for public-private partnership," the president said.
Among other things, the president said, it would be necessary to use more of the investment fund, however, the reform should not hurt the interests of passengers.
"The social aspect of railroad development should be at the core of the reform," which should be carried out exclusively by the government, Putin said.
Speaking of the social role of Russian railroads Putin said they were "one of the world's longest and handle over 40% of all passenger capacity."
He said the quality of railroads affected population density in the regions and mobility of the labor force.