Balancing affordability and financial sustainability in urban metro systems: Evidence from Hyderabad Metro

In May 2025, Hyderabad Metro Rail implemented its first major fare revision in over seven years.

- SAURABH BANDYOPADHYAY AND ISHA DAYAL

While the initial increase—based on recommendations of the Fare Fixation Committee—was announced mid-month, publicconcerns|ed toasub-sequent 10 percent discount being applied within days. The episode highlights a recurring challenge in India’s urban transport systems: how to adjust fares ina politically and socially acceptable manner while ensuring the financial sustainability of capital-intensive metro projects.The fare revision is particularly significant because it follows years of fare rigidity, despite rising operating costs and repeated institutional reviews. Hyderabad Metro had not revised fares since operations began in 2017. During this period, energy prices, staffing expenses, and maintenance costs increased steadily, while fare revenues remained constrained by an unchanged fare structure. The eventual correction—followed by a partial rollback—illustrates the difficulty of implementing large, delayed adjustments after prolonged inaction.

This challenge is examined in detail in a study by the National Council of Applied Economic Research (NCAER), submitted in early 2023 as part of an assessment supporting the Fare Fixation Committee's recommendations. Based on primary surveysofmetro users and non-metro commuters, the study analysed commuter willingness to pay, fare acceptance thresholds, and the widening gap between operating costs and revenues when fare revisions are deferred. The Hyderabad case thus offers timely empirical insight into the consequences of postponing fare rationalisation.