Urban transport systems in India have been significantly stressed due to the rapid urbanization. The stress manifests as both external and internal. External stress is the on road congestion (as significant share of the public transport systems are road based) and internal congestion is the overcrowding of people within the public transport vehicle. This study aims to investigate the overcrowding in buses and discuss its policy implications using Ahmedabad as a case study. Further deterioration of urban transport systems occur due to lack of dedicated funding available to urban local bodies to improve its level of service. To tackle the problem of level of service, it is important to understand the utility associated with a public transport service. Traditionally, this has been measured using factors such as time and monetary cost of travel. However, the level of comfort of users is not accounted for. This study uses a well-established method of contingent valuation to identify costs associated with non-marketable goods such as a level of comfort in public transport system using the concept of willingness to pay. The findings indicate Ahmedabad has high levels of crowding in its bus systems. The average per trip fare (for the two services studied) ranges from Rs 9 to Rs 12. The generalised cost, (including value of time, accounting overcrowding) turned out to be Rs 34 to Rs 41, about 3.5 times the fare. Sensitivity analysis showed that this can be lowered by 20-25% if overcrowding is negligible. The implication is that reducing overcrowding will not only increase patronage and ‘image’ of the public transport system but will also bring down the economic costs to the society.