Stricter CAFE-III Norms to Improve Fuel Efficiency of Passenger Vehicles from April 2027
The Government of India has proposed tighter CAFE-III fuel economy rules for passenger vehicles, effective April 1, 2027, to reduce fuel consumption and carbon emissions. The draft regulations include tougher fleet-average CO2 limits, compliance credits etc.
As part of the third phase of the Corporate Average Fuel Efficiency (CAFE) regulations, the government has suggested stricter fuel efficiency standards for passenger vehicles. A market-based compliance process, incentives for cleaner technology, and tighter carbon dioxide emission objectives are all part of these standards.
Draft CAFE-III standards were released for stakeholder feedback on July 16th by the Union Power Ministry. After the present CAFE-II system ends on March 31, 2027, new specifications are proposed to take effect on April 1, 2027. These shall be in effect for a period of five years.
Blue Print of the New CAFÉ-III Guidelines
Two distinct time periods would be used to evaluate compliance: the first would last for three years, and the second for two. Vehicles falling within the M1 category with a maximum of eight seats (including the driver's seat) and sold in India between 2027–28 and 2031–32 will be subject to the proposed regulations. Increasingly stringent fleet-average fuel consumption targets are proposed in the proposal. Consequently, by 2031–32, the standard will have dropped from 3.996 L/100 km (94.76 g/km of CO₂ ) in 2027–28 to 3.3273 L/100 km (78.90 g/km of CO₂ ) in 2031–32.
Vehicle manufacturers will have more time to create and release more fuel-efficient cars thanks to the phased strategy, which also aims to increase regulatory certainty. Ethanol, biofuel, and compressed biogas (CBG) vehicles would be able to achieve reduced stated tailpipe CO₂ emissions thanks to the proposal's first-of-its-kind carbon neutrality factors (CNFs). The existing ethanol blending levels have been suggested to have an 8% CNF, while the levels of prevailing blending would be used to determine reductions for CBG and other biofuels.
Further Specifications of the New Draft
While determining fleet-average fuel consumption, the draft also suggests compliance incentives for fuel-saving technologies up to 9 grams of CO₂ per km, with a limit of 1 gram per technology, and keeps volume-based "super credits" for EVs, plug-in hybrids, strong hybrids, flex-fuel vehicles, and range-extended EVs. Manufacturers that go above and above their required goals would be able to accumulate compliance credits that may be used within a compliance block, according to a proposed credit-and-debit system.
If vehicle companies don't acquire enough energy efficiency, they can still fulfil their responsibilities using carry-forward clauses, voluntary pooling agreements with other companies, or buying compliance credits from the BEE. The proposed acquisition price for each compliance credit is INR 2,500, with an additional 500 INR added each year. At the conclusion of a compliance block, any credits that are not used will lapse.
Penalties could be levied against manufacturers under the Energy Conservation Act if they did not adhere to the standards. On the other hand, manufacturers of passenger vehicles with yearly sales below 1,000 units would still be excluded. Stakeholders and the general public have until August 6 to provide feedback on the proposed standards to the Ministry of Power.
