A new city council report into bringing back train services in some city suburbs for the first time in nearly 50 years has effectively ruled the project out, despite widespread public and political support.

The report, by consultants Halcrow, claims the scheme would cost £38m – nearly twice as much as original estimates in 2004 – and any service would require a public subsidy of £1.8m a year.

City leaders today said that even with millions of pounds of private backing already secured, the project looked in doubt.

Opposition and transport groups today said they were disappointed with the findings, but urged the council not to give up on the South Sub.

Plans to re-open the route have been around for years, but last year the then-Scottish Executive said it wanted to see a new business case for the scheme before committing any money to it.

Councillor Phil Wheeler, the city's transport leader, said: "There has been cross-party support for the project, but sadly this report seems to show there isn't the market for the South Sub. We are still committed to improving public transport links in the south of the city, but you can't just use underused railway lines for the sake of it."

A feasibility study published in 2006 recommended a reinstated South Sub passenger service with trains travelling from Waverley to Haymarket, then via stations at Gorgie, Craiglockhart, Morningside, Blackford or Newington, Cameron Toll, Craigmillar and Niddrie or Kinnaird Park. It suggested the line could attract 7100 passengers per day.

The Halcrow report claims that existing expansion plans for services into Waverley and Haymarket, combined with growing passenger numbers, means the South Sub scheme would have difficulty finding space for stops at both city centre stations.

The study considered a number of options along the under-used railway lines in the south of the city. These ranged in cost from between £19.5m and £37.9m.

The Newcraighall to Edinburgh Park option was considered the best choice, but would require an annual public subsidy of £1.8m.

E-Rail – a private company formed to fight for the re-opening of the South Sub – has already secured £8.5m from landowners along the route.

The money had been secured against the fact that properties along the line would be expected to increase in value by ten per cent.

Andrew Robb, general manager of E-Rail, said: "We have received a verbal summary of what is plainly a wide-ranging study. We are looking forward to receiving a copy of the full report as soon as possible so that we may respond fully."

A full report with recommendations for the city's transport committee will be produced next month.

• www.reopenthesouthsub.org.uk