Faced with taxi drivers picketing on the streets below - some of them threatening a city-wide taxi strike - the D.C., Public Service Commission yesterday boosted cab fares by 10 cents per person per trip beginning Sunday morning.

The raise - the first authorized in the District since January - was less than the 25-cent surcharge demanded by some drivers to help pay for time and money lost waiting in gasoline lines and to skyrocketing fuel costs.

But it was more than anticipated from the PSC, which had scheduled only a procedural meeting yesterday to set hearings on the 25-cent surcharge sometime in the future.

PSC Chairwoman Elizabeth Patterson and her two colleagues agreed to the immediate late increase after representatives of various taxi organizations complained for more than an hour that current fares no longer cover their costs.

The new rates will push the cost of a one-zone cab ride from $1.20 to $1.30, and a ride crossing all eight of the city's fare zones from $5.40 to $5.50. In addition, the evening rush-hour surcharge will increase from 50 to 60 cents, and group rates will rise from 65 cents to 75 cents for each additional passenger.

The newest fare increase comes six months after the three-member commission granted the city's almost 8,600 cab drivers a nearly 10 percent fare increase - the first in city taxicab fares in three years.

But most taxi drivers, who like all area drivers, have faced an 18.2 percent increase in gasoline prices since January, said the dime increase (2 to 8 percent) was not worth a plugged nickel.

"You can't even buy a cup of coffee for 10 cents," Thelmiah Lee Jr., head of the Committee to Unionize Taxicabs, told the commission meeting.

"It's no increase and they won't consider the final (fare increase) decision until November, and by that time gas will be $1.35 a gallon," said Frederick J. Conway, president of the Alliance of Taxicab Businessmen.

But William J. Wright, chairman of the Taxicab Industry Group, said his organization was "satisfied" with the interim rate increase.

"We would have preferred the quarter," he said, "but we're not going to strike about it."

Some 50 drivers milled and muttered outside PSC offices at 1625 I St. NW during the commission meeting. About half of those had marched earlier with picket signs, proclaiming "Everything Goes Up But Our Wages," and later drove in a motorcade through the evening rush hour, waving placards.

The demonstrations were largely peaceful, but Jack Dembo, head of the Independent Hackers Association, was arrested during the PSC meeting and charged with disorderly conduct. He was later released after paying a $10 fine.

Minutes after the commission meeting, there was some confusion about whether the PSC had authorized a 10 cent or 10 percent increase.

Mayor Marion Barry talked with two of the three commissioners immediately after the hearing, then held a sidewalk press conference for the drivers and news media and announcedA 10 percent increase, which would have pushed up fares 10 to 70 cents.

Patterson quickly clarified the increase.

"We thought we understood because we had talked to two commissioners and gotten the figures, said Ed Meyers, a special assistant to the mayor.

Barry had proposed a 10.5 percent increase to the commission. He has supported the taxi drivers' efforts to obtain a fare increase since he took office in January.

Afterthe mayor received a clarification of the PSC's action yesterday evening he called the 10-cent increase "outrageous" and "inequitable" since it would raise fares for a one-zone ride 8 percent, but the price of an eight-zone trip only by 1.8 percent, he said.

The mayor said the city would petition the PSC today to reconsider the fare increase and allow fares to rise by 10 percent instead.

The Taxicab Industry Group, one of the largest cab organizations, supported ex-mayor Walter E. Washington last year during the crucial Democratic primary election, then switched to Barry during the general election.

Barry said yesterday he looked upon the fare increase issue in terms of "right and wrong" rather than in political terms.

"You have a group of struggling business people, one of the few avenues available to minority business people . . ." said Meyers. "It's an economic response, but if it helps (us) politically, there's no harm in that either."

The only disruption of yesterday's meeting came moments before the increase was granted when Dembo stood up in the meeting and shouted, "I'll go to jail because you're screwing the public . . . Strike this city! Block it up today!"

He was hauled from the room by two D.C. government guards.

On Monday, Dembo, a Yellow Cab driver, helped organize an afternoon rally during which several hundred taxicab drivers honked their horns and shouted demands for more gasoline and higher fares as they blocked downtown traffic for more than an hour.

Dembo said at that rally that drivers would strike if a fare increase was not granted.

During that rally, the mayor's office announced that an extra 200,000 gallons of gasoline from the District of Columbia's reserve fuel allocation for June had been diverted to seven service stations that sell only to cabs.