The Ministry of Road Transport and Highways has proposed a major overhaul of India's rent-a-cab regulatory framework, which could make it easier for small entrepreneurs, start-ups and local businesses to enter the car rental industry.
Under the draft Rent-a-Cab Scheme, 2026, the minimum fleet requirement for obtaining an operating licence is proposed to be reduced from 50 vehicles to just five. The proposal was highlighted in an official Ministry announcement on November 12 and received wider coverage on November 13.
Editorial Insight
Key Highlights
Important points readers should notice.
Issue/Event: Proposed overhaul of India's Rent-a-Cab regulatory framework.
Location: India
Authority/Organisation: Ministry of Road Transport and Highways.
Action Taken: Draft Rent-a-Cab Scheme, 2026 proposed with lower fleet requirements, simplified licensing and additional safety obligations.
Impact: Could create opportunities for smaller rental businesses while strengthening customer protection and operator accountability.
The proposed framework would also allow licensed operators to offer vehicles both with and without drivers. This could expand rental choices for customers while allowing smaller businesses to compete in a market that has traditionally required substantial investment.
Minimum fleet requirement reduced
One of the most significant proposed changes is the reduction of the minimum fleet size from 50 vehicles to five. Operators would still need to maintain at least two motor cabs at each approved place of operation, with a minimum total fleet of five vehicles.
Editorial Analysis
Why This Matters
The proposed changes could have a significant impact on India's organised car rental sector. - Small entrepreneurs: A five-vehicle minimum could make it easier for smaller businesses to apply for licences. - Start-ups: Lower entry barriers could encourage new companies to enter the rental market. - Customers: Additional safety equipment, insurance and grievance mechanisms could improve passenger protection. - Drivers: Police verification and proposed welfare provisions could strengthen accountability and worker protection. - Existing operators: A single electronic licence could simplify expansion within a state or Union Territory. - Competition: More licensed operators could increase consumer choice, although the actual effect on rental prices remains uncertain.
The existing requirement for operators to maintain branches in five tourist cities is also proposed to be removed. This could reduce the financial and administrative burden on businesses that want to operate in the car rental sector.
Single electronic licence across a state or Union Territory
The draft proposes replacing separate main-office and branch licences with a single electronic licence valid across the respective state or Union Territory for a uniform fee.
Approved operating locations could include airports, railway stations and bus terminals. The proposed system would also use electronic VAHAN records and automatic retrieval of vehicle information to reduce paperwork.
The licensing authority would have a proposed 60-day timeline to process licence grants and renewals. Applications to add or remove vehicles or operating locations would have a 30-day deemed-approval mechanism under the draft.
Proposed fee and vehicle requirements
The draft framework also proposes a uniform licensing fee of ₹25,000 and a five-year licence validity. It introduces a proposed maximum vehicle age of nine years.
Rental vehicles would need valid registration, fitness and pollution-under-control certificates, applicable tax payments and comprehensive insurance covering occupants. The proposal also includes requirements relating to pending traffic challans and vehicles appearing in specified police records.
Passenger safety and customer support
The proposed scheme places additional responsibilities on rental operators. Vehicles would need functional location-tracking devices and first-aid kits. Child-restraint systems would be an optional facility.
Operators would also be required to maintain a website and provide round-the-clock customer grievance support. Emergency repair and towing assistance would form part of the proposed service obligations.
The draft further proposes that website-based customer complaints be resolved within 24 hours, while complaints involving operator-provided drivers would be investigated within seven days.
Driver verification and welfare
For chauffeur-driven rentals, operators would be required to provide drivers with valid driving licences and police-verified backgrounds. Driver welfare provisions would also be linked to the Code on Social Security, 2020.
The proposed framework introduces accountability measures for serious offences involving rental vehicles or operator-provided drivers. It also provides operators an opportunity to correct non-material violations before suspension or cancellation is considered.
Public feedback before finalisation
The scheme remains a draft and has not yet replaced the existing framework. The Ministry has invited stakeholder comments on the proposed changes, with December 5, 2026, reported as the deadline for submitting feedback.
After reviewing the responses, the government will have to finalise and notify the scheme before the proposed provisions can take effect. January 2027 is the intended implementation timeline, subject to final notification.
If adopted, the reforms could lower entry barriers for small rental businesses while introducing stronger passenger-safety, insurance and customer-service requirements. The final impact will depend on the provisions retained in the notified scheme and how state and Union Territory authorities implement them.
