The federal government announced on Thursday a funding injection for Via Rail of nearly $700 million over the next five years.

Transport Minister Lawrence Cannon announced the $691.9-million initiative to help Via Rail refurbish passenger train service, at Union Station in downtown Toronto.

"As minister responsible for Via I can say it is clearly an essential entity and it has convinced millions of Canadians that trains are a more humane way to travel," Cannon said Thursday afternoon.

The funding marks the first significant injection of new money in years for the cash-strapped Crown passenger rail corporation.

The initiative included $516 million earmarked for capital acquisitions and $175.9 million for the refurbishing of locomotives and passenger cars.

Cannon said the train system acted as a binding force and played a steadily expanding social and economical role in Canada.

"The operating funding will help Via to continue providing an affordable and competitive option for intercity travel," he said.

Via Rail serves 4.1 million passengers over 14,000 kilometres of track each year. It provides service for 450 Canadian cities.

Via receives about $170 million in annual operating subsidies from Ottawa. However, the company has suffered since the former Liberal government halted a $700 million-funding commitment.

Canadian Auto Workers President Buzz Hargrove said the announcement is welcome news.

"This funding is a lifeline for VIA Rail services that was desperately needed," said Hargrove. "This announcement not only benefits the over 3,000 CAW members at Via Rail, but could also provide an example of how purchasing Canadian-made products can be used to maintain and create jobs in the Canadian economy."

Cannon said the announcement highlighted the federal government's dedication to funding the country's infrastructure.

He said the government will invest $33 billion into Canada's infrastructure through the new Building Canada infrastructure program -- Canada's largest investment in half a century.

"This plan will provide long term, stable and predictable funding to help meet infrastructure needs across the country in communities large and small," he said.

Finance Minister Jim Flaherty said Canadians are looking for transit alternatives that are economically and environmentally friendly.

"By taking the train people can bypass traffic congestion, especially in major urban centres like the Greater Toronto Area. They can save on the price of gas. They can reduce greenhouse gas emissions, all at the same time," Flaherty said.

"This is a service also that is relevant today as it was decades ago and our government is committed to preserving and expanding passenger train service for future generations."

He said the money will allow Via to provide faster, cleaner and more reliable service across Canada.

Cannon said the government signed a "memorandum of understanding" with the rail industry to set targets for emissions reductions, earlier this year.

"By rebuilding the existing locomotive fleet, Via Rail will achieve these emission targets. It will improve fuel efficiency and provide travellers with faster and more reliable service," he said.

The announcement of $691.9 million over five years is the largest capital investment in the company.

"These investments that we are announcing today will spread on a five-year period, but they will be felt much past 2013. They are now targeting energy economy, reduction of gas emission, the offering of equality services to encourage more travellers to leave their cars behind and to choose train," Cannon said.

Some funding will likely go to upgrading sleeping cars for passengers with disabilities, a requirement after a recent Supreme Court order.

"It's certainly not enough for everything Via needs, but it's a very good start," David Jeanes, president of Transport 2000 Canada, told CTV Newsnet. "The specific programs that were identified today ... that's money that really had to be spent to keep those trains in good order."

Jeanes said the company had been starved for funding for so long it can no longer meet growing demand.

"The travel demand is there and where Via sees a market it needs government support to go aggressively after that market," he said.

With files from The Canadian Press