Road ministry proposes a simplified Rent-a-Cab scheme 2026; to replace the 1989 scheme

The ministry of road transport and highways proposes to significantly simplify the norms for setting up a car renting business in the country including reducing the minimum fleet requirement to 5 compared to 50 mandated earlier besides extending its coverage to even rental cars with or without drivers.

In a draft Rent-a-Cab Scheme 2026, which will replace the 37 year old framework of 1989 governing the car renting industry in India, the ministry has also made provisions for online licensing, time-bound approvals, stringent safety, insurance and operational requirements and formal grievance redressal mechanism.

The proposed scheme is expected to come into force from January 2027.


In 2021, the road ministry made an amendment to the scheme to cover battery operated cabs and those running on green fuel like ethanol or methanol.

The government is of the view that the reduction in minimum fleet requirement is expected to encourage smaller entrepreneurs, start-ups and even local car-rental companies to enter the business while enabling existing operators to expand operation to new locations even with a minimum fleet size of five.

The draft scheme, notified recently, proposes to fix the licensing fees at Rs 25,000 irrespective of the fleet size while introducing a nine-year age limit for vehicles while the validity of the licence has been kept at five years.

The existing licensing fee is Rs 5000 plus Rs 1000 per location while there is no age limit for the vehicle.

The ministry has invited comments on the draft scheme until December 5 after which the final scheme will be notified.

It explicitly lists out that all rented vehicles should have a valid registration, no pending challans, fitness and pollution under control certificates, all taxes paid and a valid insurance for all occupants including the driver.

The scheme also proposes to cover renting vehicles with or without driver, a shift from the erstwhile scheme which provided for self-drive rentals. Moreover, it mandates operators to provide drivers with a valid licence and welfare coverage under the Social Security Code, 2020.

“It shall be the duty of every rente, to ensure that the vehicle location and tracking device is functional at all times and immediately inform the licensee in case the vehicle location and tracking device is defective or non-functional,” it said.

As per the draft scheme, the online applications and renewal will have to be processed within 60 days while the applications for removing operating locations and vehicles will be deemed approved if not processed within 30 days.