More than 40 years after the State Electricity Commission of Victoria stopped running a commuter public tram service in Bendigo - a move that saw about 10 kilometres of tram lines covered in bitumen or ripped up - a $120,000 study will examine whether passenger trams could be returned to the Goldfields city.

Consultants will investigate whether Bendigo's 4.1 kilometre tourist tramway could serve tourists and local commuters in the same way that cable cars and other trams do in cities such as New Orleans and San Francisco.

In recent years locals have pushed for a commuter tram service, with some arguing for a new line that would run from the Bendigo Railway Station, across the CBD and to the local hospital, a distance of about three kilometres, citing the increased traffic the hospital redevelopment will bring to the city. Month-long trials of a commuter service running at 20-minute intervals have also been undertaken in recent years.

The study will also investigate whether the tramway’s tourism appeal would be enhanced if it was extended with extra track in order to reach more tourism destinations. The tourist tramway runs along Bendigo’s main street and links a range of Bendigo's most popular attractions such as the Central Deborah Gold Mine and Charing Cross.

The study, funded by the state government, Bendigo Trust and City of Greater Bendigo, will assess whether the current track should be duplicated and given extra stops. And it will also assess whether there could be a role for modern light rail vehicles to operate commuter services.

Bendigo’s trams are a popular tourist attraction, visited by tens of thousands of people each year who ride the trams, tour the tramways depot and visit other landmarks.

But the manager of the tramways, Jos Duivenvoorden, said patronage was fading slightly each year and the study was needed to help improve the tramways' sustainability and its tourism offering. ''We absolutely want to improve the quality of the product,'' he said.

''For a long time now we've been concerned about the lack of change and further development of our tramway system. It's pretty much operating like it did 30 years ago,'' he said.

Craig Niemann, CEO of the City of Greater Bendigo, said that discussion about the possibility of reintroducing a commuter service was ‘‘a conversation that’s happening around Bendigo all the time, about bringing back the trams ... Well, let’s do some research, get someone to concentrate on what could or could not happen and give us some facts around it so we can make some decisions,’’ he said.

‘‘It’s a feature of our tourism offer, it’s a feature of the city with the tram line running down the main street. From that perspective it’s a big important part of the heritage of the place. The study needs to be done to either provide the data and the information to progress this [commuter service idea], or to say ‘this isn’t feasible’ and we need to put it away,’’ he said.

Mick McGowan, a member of the Bendigo Trust board and a voluntary tramways inspector, said the tramway was a key part of Bendigo's history and the new study was a necessity. ''It's a highly visible part of our heritage because the infrastructure tends to give a sense of permanence and longevity as well as a sense of history,'' he said.

''To be sustainable we've probably got to relook at the product that we're offering, we've probably got to look at being more than just a tourist attraction,'' he said.

Mr McGowan said he believed a commuter tram on ''a high density route'' in Bendigo could work, such as between the hospital and railway station.