The Ministry of Road Transport and Highways has proposed reducing the minimum fleet requirement for establishing car rental businesses from the existing 50 vehicles to five.

The move is aimed at encouraging small entrepreneurs, start-ups and local operators to enter the sector.

According to a media report, the proposal forms part of the draft Rent-a-Cab Scheme 2026, which seeks to replace the 37-year-old regulatory framework introduced in 1989. The revised scheme will cover rental vehicles operated both with and without drivers, expanding the scope of regulation beyond the self-drive segment.

The government expects the proposed reduction in fleet requirements to make it easier for smaller operators to establish businesses and enable existing players to expand into new locations without having to maintain large fleets.

Under the draft rules, the licensing fee has been proposed at Rs. 25,000 (US$ 265), irrespective of fleet size. The licence will be valid for five years, while vehicles operating under the scheme will be subject to a maximum age limit of nine years.

The proposed framework also provides for online licensing, time-bound approvals, stricter safety and insurance requirements, operational standards and a formal grievance redressal mechanism. The ministry has invited comments from stakeholders on the draft scheme until December 5th, following which the final regulations will be notified. The proposed scheme is expected to come into force in January 2027.

Stricter safety and operational requirements

The draft scheme mandates that all vehicles offered for rent must have valid registration, fitness and pollution under control certificates, with all applicable taxes paid and no pending traffic challans. Operators will also be required to maintain valid insurance coverage for all occupants, including the driver.

For vehicles operated with drivers, the scheme requires operators to ensure that drivers hold valid driving licences and receive welfare coverage.

The draft also places the responsibility on renters to ensure that vehicle location and tracking devices remain functional throughout the rental period. Renters must immediately inform the licensee if a tracking device becomes defective or non-functional. The proposed regulations follow an amendment introduced in 2021 that brought battery-operated taxis and vehicles running on green fuels such as ethanol and methanol under the Rent-a-Cab Scheme.