Govt clears surge pricing up to 2X as new cab rules promise fairer rides and driver pay

Cab rides during rush hour could soon get pricier. The union government has now allowed app-based cab aggregators such as Uber, Ola, and Rapido to charge passengers up to twice the base fare during peak hours — a sharp hike from the previous 1.5x limit.

The move is part of the newly released Motor Vehicle Aggregator Guidelines, 2025, notified by the Ministry of Road Transport and Highways (MoRTH) on July 1. While aimed at providing a more “light-touch” regulatory framework, the revised guidelines come with sweeping changes impacting both fare structures and driver compensation.

According to the new policy, aggregators can also charge as low as 50% of the base fare during non-peak hours, potentially allowing for discounted rides during off-peak periods.

The base fare, as defined, will be the rate fixed by state governments for various vehicle categories. States have been asked to adopt these guidelines within three months.

To compensate for “dead mileage”—the distance a cab travels without a passenger—the fare must cover a minimum of 3 km, but passengers cannot be charged for the pick-up distance unless their ride is under 3 km. Fares will only be charged from the journey’s origin to its destination.

In a win for gig workers, the government has stipulated that:

• Drivers using their own vehicles must receive at least 80% of the total fare.
• If the vehicle is owned by the aggregator, the driver must receive at least 60% of the fare.
• Payouts can be made daily, weekly, or fortnightly, depending on mutual agreement, but not beyond that.

On cancellations, the guidelines impose penalties of up to ₹100:

• Drivers canceling without valid reason after accepting a ride will be fined 10% of the fare (capped at ₹100).
• The same penalty applies to passengers who cancel rides without justification.

MoRTH said the revised framework updates the original 2020 guidelines and strikes a balance between consumer safety, driver welfare, and a flexible regulatory approach in the rapidly evolving ride-hailing sector.

“These changes aim to ensure transparency, fair earnings for drivers, and better experiences for passengers — without placing undue burden on either side,” the ministry said in a statement.