India Proposes CAFE-III to Tighten Norms for Passenger Vehicle Fuel Efficiency

The Ministry of Power has released a draft proposal for the Corporate Average Fuel Economy (CAFE)-III norms, introducing stricter fuel efficiency standards for passenger vehicles in India. The proposed regulations are expected to be implemented from FY2027-28 to FY2031-32, requiring automobile manufacturers to meet fleet-wide fuel economy targets. The initiative aims to improve fuel efficiency, reduce carbon emissions, and support India's transition towards cleaner mobility.

The proposed framework follows extensive consultations with the automotive industry earlier this year. Industry stakeholders have largely welcomed the draft, viewing it as a balanced approach that encourages better fuel efficiency while giving manufacturers sufficient flexibility to comply with the new standards.

During discussions on the draft, some automakers suggested introducing a separate compliance category for small cars, arguing that lightweight and more affordable vehicles should be evaluated under different fuel efficiency benchmarks. However, others felt that an additional category was unnecessary, as the revised methodology already considers vehicle weight when determining fuel efficiency targets. Under the proposed formula, smaller vehicles receive relatively relaxed targets, while larger and heavier models are expected to meet stricter standards.

The draft policy also continues to provide higher incentives, or "super credits," for battery electric vehicles (BEVs) than for strong hybrid vehicles. This indicates the government's continued focus on promoting fully electric mobility as part of its long-term strategy to reduce emissions and accelerate EV adoption in India.

If implemented, the CAFE-III norms are expected to encourage automakers to introduce more fuel-efficient petrol, diesel, hybrid, and electric vehicles while supporting the country's broader environmental and energy-efficiency goals.