New CAFE-III Draft: Centre Tightens Fuel Efficiency Norms, Gives Boost to Biofuel Cars
The Ministry of Road Transport and Highways has released the draft Corporate Average Fuel Efficiency (CAFE)-III norms for stakeholder consultation, proposing tighter fuel efficiency and carbon emission standards for passenger vehicles from April 1, 2027. Industry stakeholders have until August 6 to submit their feedback.
Under the proposed norms, manufacturers will be required to progressively improve the fuel efficiency of their fleets. The target fuel consumption is proposed to be tightened from 3.996 litres per 100 km (94.76 gCO₂/km) in 2027-28 to 3.327 litres per 100 km (78.90 gCO₂/km) by 2031-32. Compliance will be assessed over two blocks: a three-year period followed by a two-year period, instead of the current annual assessment.
For the first time, the draft introduces Carbon Neutrality Factors (CNFs) that recognise the lower lifecycle carbon footprint of renewable fuels such as ethanol, compressed biogas (CBG), and other biofuels. Manufacturers will be allowed to reduce the declared tailpipe carbon dioxide emissions of their vehicles before compliance is assessed. For current ethanol blending levels, a reduction of eight percentage points has been proposed, while reductions for CBG and other biofuels will depend on prevailing blending levels.
The draft also proposes additional incentives for manufacturers adopting fuel-saving technologies. They can claim compliance benefits of up to 9 gCO₂/km, subject to a maximum benefit of 1 gCO₂/km for each approved technology. Super credits will be granted for Battery Electric Vehicles (BEVs), Range-Extended Electric Vehicles (REEVs), Plug-in Hybrid Electric Vehicles (PHEVs), Strong Hybrid Electric Vehicles (SHEVs), and Flex-Fuel Vehicles (FFVs) while calculating fleet average fuel consumption, encouraging the adoption of cleaner vehicle technologies.
Manufacturers who achieve performance better than their prescribed targets will earn compliance credits, which may be carried forward within the prescribed compliance blocks. The phased tightening of targets aims to provide a clear and predictable regulatory pathway, enabling manufacturers to progressively develop and deploy more fuel-efficient vehicle models.
The proposed norms have divided the automobile industry, with manufacturers of smaller and larger vehicles taking opposing positions on how the regulations should be framed. The government has invited stakeholders to submit their responses by the deadline.
