New Delhi, July 16: The Ministry of Power has released the draft Corporate Average Fuel Economy (CAFE-III) norms for public consultation, proposing a new five-year fuel efficiency framework for passenger vehicles from April 1, 2027, as India moves to tighten fuel efficiency standards and reduce fleet emissions.
The draft, circulated on Thursday for stakeholder consultation, will apply to M1 category vehicles, which include passenger cars carrying up to eight occupants in addition to the driver. The category covers hatchbacks, sedans and sport utility vehicles (SUVs) sold for personal use, while commercial goods carriers and buses remain outside its scope.
The proposed CAFE-III regime will replace the existing CAFE-II norms, which are scheduled to expire on March 31, 2027. Under the new framework, compliance will be assessed in two phases over five years. The first phase will span three years, followed by a second phase of two years, with fuel efficiency targets becoming progressively stricter during each year of implementation.
The Bureau of Energy Efficiency under the Ministry of Power will oversee the implementation of the framework. The proposed norms are intended to reduce average fleet emissions to significantly lower levels by the financial year 2031-32.
The draft also outlines a compliance credit mechanism under which each compliance credit has been valued at Rs 2,500 during the initial year, with the value increasing by Rs 500 annually throughout the compliance period. Unused credits will expire once the compliance period concludes.
Automobile manufacturers failing to achieve the prescribed fuel efficiency targets could face penalties, although the draft does not specify the penalty amounts. Manufacturers with annual sales of fewer than 1,000 vehicles will remain exempt from the proposed compliance requirements.
The proposed norms have drawn differing responses from the automobile industry during earlier consultations. The Society of Indian Automobile Manufacturers (SIAM) supported the proposal, describing it as balanced. However, some automobile manufacturers have sought relaxation for small petrol-powered cars, while others have opposed any differentiated treatment for that segment.
The Ministry of Power has invited comments and suggestions from stakeholders as well as members of the public on the draft framework. Feedback may be submitted to the Under Secretary (Energy Conservation) at the Ministry’s New Delhi office or through email.
The last date for submitting comments is August 6, 2026. The Ministry stated that the draft norms will also be made available on the websites of the Ministry of Power and the Bureau of Energy Efficiency.
Corporate Average Fuel Economy norms prescribe fuel efficiency and emission standards for passenger vehicles and are revised periodically as part of efforts to improve energy efficiency and reduce greenhouse gas emissions from the transport sector.
