Railway officials suspect that the incident occurred due to a short-circuit.
Prime Minister Manmohan Singh has expressed shock and grief over the loss of lives in the fire accident.
He also spoke to Railway Minister Mallikarjun Kharge and inquired about the steps being taken for rescue and relief work at the accident site.
Describing the incident as "tragic" and "most unfortunate", Kharge ordered an enquiry into the incident by Commissioner of Railway Safety.
The Railway Minister announced an ex-gratia of Rs 5 lakh to the next of kin of the deceased, Rs 1 lakh in case of grievous injuries and Rs 50,000 for simple injuries.
He has also asked senior railway officials such as Member Electrical and Director General Health to rush to the spot.
Chairman, Railway Board, Arunendra Kumar said the reason behind the accident is yet to be ascertained.
However, prima facie there could be two reasons - one is short circuit and the other presence of inflammable material.
The magnitude of the accident suggests that short circuit was unlikely, he said.
Asked whether it could be inflammable material, he said it could be and the inquiry would go into it.
"We have asked for forensic experts from Bangalore and Hyderabad to examine the site," he said.
The Railway Minister and the Railway Board Chairman are rushing to the site.
The affected coach has been detached and train has resumed its onward journey.
The Railways have also set up helpline numbers to disseminate latest information to passengers and family members of the affected.
The Bangalore numbers are -- 080 22354108, 080 22259271, 080 22156551 and 080 22156554.
Helpline at SSP Nilayam station are -- 085 552 80125 and 097 31666863.