Bangalore Metro Rail Corporation Ltd. (BMRCL), which operates the Namma Metro service in Bengaluru, received a fare revision report from the Fare Fixing Committee (FFC) in December 2024. It was the first time that a third party recommended fares for the service, similar to the rate setting by the regulator. When the report was implemented, there was a public outcry and fares were reduced from recommended levels. After one year, in February 2026, the loss-hit corporation tried to raise fares again, but again there was a public outcry and the increase was put on hold.
What is troubling Namma Metro?
Formed by the Union Ministry of Housing and Urban Affairs and approved by a Cabinet Committee, the FFC consisted of Madras High Court judge Justice R. Tharany as chairman and Additional Secretary of the Ministry Satyendra Pal Singh and former Additional Chief Secretary, Karnataka, EV Raman Reddy as members. The appointment document lists the members of the committee and the duration of the work, but does not mention the conditions. This was left to section 35 of the Railway Meters (Operation and Maintenance) Act 2002.
Two FFC members and three BMRCL officials visited Singapore and Hong Kong to study the metro systems operating in these cities. It cost ₹13 million for the two members and another ₹12 million for the officials. FFC also visited Delhi and Chennai metros. The main purpose of the study and report was to improve the financial position of BMRCL which is in the red and earn enough money to service at least the foreign debt. But she couldn’t do it because of opposition from the public and traffic experts. The reasons for criticism are as follows: the fare is unaffordable; is the highest compared to Mumbai and Delhi tariffs; and costs are inflated based on miscalculations.
The report identified the current revision of fares from previous seven-year-old tickets as three components: consumer price index, electricity rates and maintenance and administration expenses, each of which has its own weight in the final basket in 2024. While the first two can be seen as effective costs as BMRCL is not responsible for them, the last one is the company’s own increase in maintenance and administration costs, which have increased by 366% over seven years – a figure consistent over seven years by 366% years.
Other metros have different conditions. Those in Mumbai and Hong Kong have more riders and good non-fare income – such as advertising and commercial space rentals. Delhi has government subsidies; so is Singapore and even Chennai. Additionally, Mumbai and Delhi do not have free bus rides for women like Bangalore does, leading to lower earning potential. In Singapore, the dominant mode of transport is the subway, with buses and MRT accounting for 42% of commuters, cars 36%, walking 18% (the city-state has footpaths) and taxis and cycling 4%. In addition, Singapore has tackled traffic congestion with a highly valued market-auctioned permit that is mandatory for driving on its roads and by charging peak loads to use certain roads in business districts during peak hours. These are pushing the demand for the MRT.
Last mile problem
In Bangalore. the legendary traffic snarl — which has brought Delhi as much shame as pollution — should drive people to the metro, but the last-mile problem remains, militating against such a switch. Almost every car owner has a scooter, but where will he park near the metro and how will he commute from his destination to his office without getting fooled by autorickshaw drivers? The market solved this problem in Mumbai. When thousands of passengers are being thrown out at Churchgate station in Mumbai at 9.30 am, one sees a line of taxis and a long queue of passengers boarding these shared taxis four by four and going to their office paying just ₹15. On the contrary, five to 10 autorickshaws remain parked at Bangalore’s JP Magar metro station, but they demand more than ₹60 even for a 1-2 km commute. The market developed in Mumbai; does not have in bangalore.
While FFC looked at the Mumbai metro, it should actually look at the suburban electric trains and their prices in the metropolis. Without them and their very low price structure, one cannot even imagine Mumbai being so mobile. Are they making losses? I’m not sure the doorless trains could have been completely written off; the only operating costs are staff salaries and electricity. There should be 150% occupancy (people hanging off the train).
Which one will you choose? Low fares and huge number of commuters whose very livelihood depends on these trains or expensive Vande Bharats, half empty like European trains? What is the secret of the first engraved in people’s lives? The secret is the subsidy. It should not be a compensatory subsidy, calculated ex-post, which will emphasize cost-effectiveness, but a subsidy determined ex-ante. FFC has set two goals: affordability for consumers and long-term financial sustainability for the organization. Since the government has the instrument of taxation, in addition to the pricing instrument that businesses have, sustainability is not an issue if the government is willing to provide subsidies. From the point of view of public finances, it is optimal. To achieve the social optimum, the organization allows consumers to enter until they cover only marginal cost, unlike a marketer who equates marginal revenue with marginal cost, thereby limiting output/service. In our parlance, BMRCL should reduce prices till capacity utilization is maximum. However, it should not suffer losses; so government subsidies, ex-ante. It was on this premise that Zohran Mamdani promised a free subway for New Yorkers and won the election. In India, Jayalalitha, in her tenure as Chief Minister of Tamil Nadu, did the same for Chennai buses, ordering very low fares and winning the favor of the people and the votes of the voters.
It is something like the prices of newspapers or even better e-paper. Charge low to newspaper readers who have elastic demand, increase your circulation and charge high to advertisers who have inelastic demand and can pay for your eyeballs. That’s what the Hong Kong subway does: significant revenue from the non-travel box. The fare is only $1 or so. You can even have one board and a fixed price like in the New York or Paris subway. Metro should view commuters as its constituency, just as teachers should view their students.
While profit is maximized by matching marginal revenue to marginal cost, economic efficiency is achieved by matching price to marginal cost. The argument is that fixed costs are sunk costs and may not be covered because the government has a way of taxation to raise resources. Fixed costs become sunk costs that have no effect on pricing. Once the investment is made, the focus should be on maximizing capacity utilization.
The author is a former RBI Professor at the Indian Institute of Management, Bangalore and a former member of the regulator, Telecom Regulatory Authority of India. Opinions expressed are personal.
Published – 05 Apr 2026 0:29 IST
