Find a fare balance for Namma Metro

Bangalore Metro Rail Corporation Ltd. (BMRCL), which runs the Namma Metro service in Bengaluru, got a report on fare revision from a fare fixing committee (FFC) in December 2024. This was the first time a third party was recommending the fares for the service, akin to a regulator’s tariff determination. When the report was implemented, there was a public outcry and the fare was brought down from the recommended levels. Stung by losses, after one year, in February 2026, the corporation once more sought to raise the fare, but again there was a public outcry and the raise put on hold.

What ails Namma Metro?

The FFC, constituted by the Union Housing and Urban Affairs Ministry and approved by a Cabinet Committee, consisted of a retired Madras High Court judge, Justice R. Tharany, as Chairman, and Additional Secretary to the Ministry Satyendra Pal Singh and former Additional Chief Secretary, Karnataka, E.V. Ramana Reddy as members. The appointment letter names the members of the committee and the duration of work, but does not mention the Terms of Reference. This was left to Section 35 of the Metro Railways (Operation and Maintenance) Act, 2002.

Two FFC members and three BMRCL officials toured Singapore and Hong Kong to study the Metro systems operating in those cities. It cost ₹13 lakh for the two members and another ₹12 lakh for the officials. The FFC visited Delhi and Chennai Metros also. The main purpose of the study and the report was to improve the financial position of the BMRCL, which is in the red, and earn enough money to service at least the foreign debt. But it could not do it owing to a pushback from the public and traffic experts. The reasons for the criticism are as follows: the fare is unaffordable; it is the highest compared with fares in Mumbai and Delhi; and costs are inflated, based on flawed calculations.

The report determined the current fare revision from previous seven-year-old fares from three components: consumer price index, electricity rates, and maintenance and administration expenditure, each with its weight in the final basket in 2024. While the first two can be understood as efficient costs, since the BMRCL is not responsible for them, the last is the corporation’s own increase in maintenance and administration costs which have increased by 366% over seven years — this figure is inconsistent with their own 7% cap of this head for future years.

The other metros face different conditions. Those at Mumbai and Hong Kong have more riders and good non-fare revenue — for instance, from ads and rents from commercial space. Delhi has government subsidy; so does Singapore and even Chennai. Besides, Mumbai and Delhi do not have free bus commute for women, as Bangalore has, leading to a lower revenue potential. In Singapore, the metro is the dominant mode of transport with bus and MRT accounting for 42% of commuters, cars 36%, walking 18% (the city-state has footpaths), and taxis and cycling 4%. Besides, Singapore has addressed traffic jams with a high-priced permit auctioned in the market mandatory to drive on its roads and peak-load pricing to use certain roads in business districts during peak hours. These push the demand over to MRT.

Last-mile problem

In Bangalore. the legendary traffic snarls — which have brought it as much infamy as pollution to Delhi — should push people to metro, but the last-mile problem remains, which militates against such a switchover. Almost every car owner has a scooter, but where will she park near the metro and how will she commute from the destination to her office, without getting fleeced by autorickshaw drivers? Market has addressed this issue in Mumbai. When thousands of passengers are disgorged at the Churchgate station in Mumbai at 9.30 a.m., one sees a series of taxis and a long queue of passengers getting four each into these share taxis and going to their office paying as little as ₹15. On the contrary, in the J.P. Magar Metro station in Bangalore, five to 10 autorickshaws stay parked, but they demand upwards of ₹60 even for a commute of 1-2 km. Market has developed in Mumbai; it has not in Bangalore.

While the FFC has looked at the Mumbai Metro, it should actually be looking at the suburban electric trains and their fares in the metropolis. Without them and their very low fare structure, one cannot even imagine Mumbai being so mobile. Do they make losses? Not sure, the trains, without doors, may have been completely depreciated out; the only running cost is the staff salaries and electricity. There should be a 150% load factor (people hanging out of train).

Which one you choose? Low fare and huge number of commuters, whose livelihood itself depends on those trains, or high-fared Vande Bharats, half-empty as European trains? What is the secret of the former being etched in the lives of people? The secret is subsidy. It should not be a balancing subsidy, calculated ex-post, which will militate cost efficiency, but a subsidy determined ex-ante. The FFC has set itself two objectives: affordability for consumers and financial sustainability in the long run for the organisation. Since the government has a taxation instrument, apart from the price instrument which businesses have, sustainability is not an issue, as long as government is willing to give subsidy. From a public finance point of view, it is optimal. For reaching social optimum, the organisation will let consumers come in till they cover just the marginal cost, unlike a businessman who will equate marginal revenue to marginal cost, and thereby restrict the output/service. In our parlance, the BMRCL should lower prices till capacity utilisation is maximum. But it should not suffer losses; so government subsidy, ex-ante. It is on this premise that Zohran Mamdani promised free metro for New Yorkers and won the election. In India, Jayalalitha, in her tenure as Tamil Nadu Chief Minister, did the same for Chennai buses, mandated very low fares, and earned the goodwill of the people and votes of the electorate.

It is somewhat like newspaper, or better still, e-paper, pricing. Charge low with newspaper readers who have an elastic demand, increase your circulation and charge high from advertisers, who have inelastic demand and can pay for your eyeballs. That is what Hong Kong metro is doing: significant revenue from non-fare box. The fare is only $1 or so. You can even have a single slab and fixed price as in the New York or Paris metros. Metros should look at commuters as their constituency, just like teachers should look at their students.

While profit is maximised by the firm equating marginal revenue to marginal cost, economic efficiency is achieved by equating price to marginal cost.  The argument is fixed costs are sunk costs, and need not be recovered, as Government has the taxation route to mop up the resources.  The fixed cost becomes a sunk cost, which has no influence in pricing.  Once the investment is made, the focus should be on maximising capacity utilisation.

The author is a retired RBI Chair Professor at the Indian Institute of Management, Bangalore, and former Regulator Member, Telecom Regulatory Authority of India. Views expressed are personal.

Published – April 05, 2026 12:29 am IST