Bengaluru Metro’s fare hike: Confusion and contradictions

Satya Arikutharam

In mid-February 2025, Bengaluru metro commuters experienced a significant fare hike. Following the commuter outrage and political mudslinging, the Chief Minister of Karnataka directed the Bangalore Metro Rail Corporation Limited (BMRCL) to review the fares. 

A press conference then followed, where the BMRCL managing director admitted to “technical” errors while struggling to explain both the basis and the subsequent partial rollback of the fare hike. Yet, 80% of commuters ended up paying more than 70% higher fares. 

Commuters demanded the publication of the Fare Fixation Committee (FFC) Report, which recommended the extraordinary fare hike. BMRCL refused to provide the document and stated that it was confidential in response to RTI requests. Recently, BMRCL finally uploaded the FFC Report.

The flawed formula

The FFC report revealed that BMRCL had requested a fare hike of 105.15%, purportedly based on the DMRC’s 4th FFC formula.

This formula estimates the changes in staff, energy, maintenance and administration costs since the last fare hike. Staff cost changes are calculated based on the Consumer Price Index. Average energy cost changes per unit, as well as maintenance and administration costs per route kilometre, are derived from the audited financial statements. 

The question is: Why use a formula when actual audited O&M cost data is already available for all the components? The formula could indicate how closely the O&M cost base aligns with the CPI, given that staff costs account for 61% of the total O&M costs. 

However, BMRCL, for reasons unknown, applied the formula and also made an error, particularly in its estimate of the maintenance cost/km changes. While applying the formula BMRCL inappropriately implied a 105.15% increase in O&M costs per kilometre since 2017-18 (or 2016-17, given the erroneous use of data from both years). In contrast, total audited O&M costs increased by 39.6% between 2017/18 and 2023/24. The only explanation for this difference is the faulty application of the formula.

The BMRCL seems to have mixed up costs from 2016-17 and route kms from 2017-18 in calculating the maintenance and admin cost/km in the base year. These costs associated with running 30.3 km of metro network in 2016-17 were divided by 42.3 km of metro network in 2017/18 to calculate the cost/km. Naturally, the low base of 0.38 crores/km thus calculated exaggerated the cost/km increase to a massive 366% relative to 2023/24 costs, which were 1.77 crores/km.

The energy cost per unit, as indicated by BMRCL in the formula, also differs from the unit rates for BMRCL published by KERC. Correcting for these errors, the formula estimates a fare hike of 50.23% (as against 105.15%), which is much closer to the 39.6% increase in total O&M cost/km based on audited financial statements. Interestingly, the CPI increase from the last fare hike to September 2024 was 47.12%, clearly indicating that BMRCL’s O&M cost base mainly grew in line with the CPI.

Where did FFC falter?

The FFC Report acknowledged BMRCL’s fare hike request but failed to highlight the flaws in its application, particularly the low cost/km and the incorrect base year. A detailed analysis would have revealed several other fundamental flaws in BMRCL’s cost and revenue management.

 BMRCL has a record of inordinate construction delays, which have severely impacted revenue generation. 

 With all its foreign currency-denominated loans, BMRCL has no basic hedging strategy for loan servicing.

 BMRCL doesn’t conduct cost audits, as there is no mandatory requirement to maintain cost records and audits.

 BMRCL has not leveraged the vast potential of non-farebox revenues 

So, is BMRCL trying to recover the financial implications of delays, poor cost and loan management, and low non-fare box revenues through an unreasonable high fare hike? This should have been a natural and obvious question for
the FFC.

FFC also did not ask BMRCL why it considered the DMRC formula suitable for BMRCL. The 3rd FFC of Delhi in 2009 had made its fare hike recommendations solely based on CPI changes. However, the DMRC Board felt that CPI was not representative of its O&M costs increase and therefore decided in 2016 to base its fare hike request on the formula, which was reviewed and corrected by the 4th FFC.

The original DMRC formula had only considered absolute cost changes, which exaggerated the cost increase without adjusting for network expansion. Eventually, the DMRC actually implemented a fare hike of 108% after applying the corrected formula, which was significantly lower than the actual O&M cost/km increase of 133%.  

Had BMRCL just made a case for a 39.6% fare hike based on its historic O&M cost/km increase, the FFC would have easily awarded it, as the basis for the claim was audited financial statements. However, FFC was faced with a 105.15% hike request, which was clearly unaffordable for commuters. Therefore, it moderated the hike to a simple average of 51.55%. 

However, fare slabs that account for almost 80% of passengers saw a more than 70% increase. FFC should have insisted that the average 51.55% hike be uniformly applied, i.e., capped at 51.55% for all fare slabs, to lessen the burden on Bengaluru commuters. Not doing so resulted in a steep 71.43% increase, compared to the O&M cost increase of 39.6%.

BMRCL should fix fair fares

BMRCL, in its clarification to the errors pointed out on social media, insisted the formula was correctly applied. In doing so, it basically admitted to the use of 2016-17 costs and 2017-18 route kms. 

Regarding energy costs, BMRCL stated that there are other cost components associated with energy costs. However, BMRCL continues to be charged concessional tariffs even in 2025-26, and unit costs are likely to come down further in the next two years. Therefore, while unit energy costs decreased from 2017-18, BMRCL estimates that they have risen by 33.72% solely due to other energy cost components.

BMRCL, in another set of clarifications, admitted that the 105.15% increase request had components other than O&M expenses. According to BMRCL, it is a portion of depreciation and debt servicing components. However, it is a mystery how exactly BMRCL incorporated this into the formula. The formula clearly doesn’t allow for any other cost components.

The Bengaluru Urban Transport and Infrastructure Fund collects cess and surcharges on various activities and transactions. BMRCL receives a 43.33% share from this fund, primarily to fund metro expansion, interest repayments, and the depreciation fund. Therefore, Bengaluru commuters should not be funding metro expansion, interest repayments or depreciation through fares.

Thus, BMRCL cannot be allowed to pass off its inefficiencies through an unfair fare hike to Bengaluru commuters. The fare hike must be reduced and capped at 51.55% of the FFC recommendation, and it should be frozen until the Pink and Blue lines are completed. Only that represents a fair fare hike for Bengaluru commuters.

(The author is an independent mobility expert)