A spokesman for the franchising director, John O'Brien, said yesterday that financial penalties would be levied on South West Trains under the performance regime agreed when it was awarded the seven-year franchise a year ago.
The cancellations are a severe embarrassment for Stagecoach, which took over the franchise promising an improved service, better trains and more customer information.
The company, headed by Brian Souter, has served notice that it intends to expand aggressively from the bus industry into trains. But in recent days it has lost out in the bidding for two high-profile franchises - the West Coast Mainline and ScotRail.
South West Trains' commercial director, Peter Cotton, is to be quizzed about the cancellations at a meeting with a rail users' committee tomorrow evening. A spokeswoman for the London Regional Passengers Committee said: "We are concerned about what is happening and so are our passengers. We have had an influx of complaints and want to hear some answers."
The root cause of the problem is a redundancy programme introduced last month which resulted in 70 of South West Trains' 750 drivers taking voluntary severance. A spokeswoman insisted that although the company still had more drivers than it needed, it had been forced to cancel services because a number of train crews had been sent on retraining courses to cope with new routes and rostering arrangements.
South West Trains is one of the busiest commuter railways in Europe, operating services between London, Southampton, Weymouth and Exeter as well as suburban services to the west and south of London. It transports 300,000 passengers a day. Among the trains that have been cancelled are mainline services to Reading and peak-time commuter services.
The spokeswoman said that it had only cancelled an average of 14 services out of the 1,500 it runs every weekday but she conceded that most of these were at peak times and that it was causing inconvenience to passengers.
"We are not complacent about the cancellations and we are working hard with Aslef, the train drivers' union, to rectify the problems," she added.
Stagecoach was awarded the franchise in February last year after agreeing to operate the service with a subsidy falling from pounds 54.7m in the first year to pounds 40.3m in year seven. This compares with the pounds 83.4m subsidy British Rail was budgeted to receive in 1995-96.
The Office of Passenger Rail Franchising said that it had been in contact with South West Trains and had made it plain that it expected the problems to be rectified as a matter of urgency. "It is not our job to run their business but we do have unlimited powers to penalise rail operators who fail to deliver," a spokesman added.
Under the performance regime, Opraf can penalise operators on a monthly basis if they fail to meet agreed service levels. The system is weighted so that penalties are higher if trains are cancelled at peak times.