The Ministry of Power has notified the new Corporate Average Fuel Economy (CAFE-III) norms for passenger vehicles, tightening fuel efficiency requirements from 1 April 2027 as India seeks to reduce fossil-fuel consumption and accelerate the adoption of cleaner mobility technologies.
The norms will apply to new passenger vehicles manufactured or imported for sale in India and will remain in force until 31 March 2032. The framework replaces the existing CAFE norms and introduces progressively tighter fleet-average fuel consumption targets over the five-year period.
Fuel consumption target tightened
Under CAFE-III, the fuel-consumption benchmark will be tightened from 3.996 litres per 100 km in 2027–28 to 3.3273 litres per 100 km in 2031–32. This represents an improvement of around 16.7% over the five-year period.
The year-on-year tightening is intended to push manufacturers towards more fuel-efficient vehicle technologies while providing a defined regulatory pathway for the industry to plan investments and product strategies.
The framework has also flattened the target line to adopt a more weight-sensitive approach. While lighter vehicles will face relatively softer targets, heavier vehicles will be subject to greater fuel-efficiency requirements.
Reference weight raised
The reference weight used under the CAFE framework has been increased to 1,229 kg from 1,082 kg under the existing norms, a rise of around 13.6%.
The change reflects the evolution of India’s passenger vehicle fleet, including changes in vehicle size, features and technology.
The Ministry said the revised framework seeks to balance higher fuel-efficiency ambition with greater flexibility for manufacturers in choosing the technologies and pathways through which they meet their obligations.
More technology pathways
CAFE-III expands the compliance framework beyond conventional fuel-efficiency improvements and electrification. It recognises the role of alternative fuels, renewable fuels and technologies that can reduce vehicle energy consumption.
The framework introduces a Carbon Neutrality Factor (CNF), under which renewable and low-carbon fuels such as ethanol-blended petrol, biofuels and compressed biogas (CBG) can contribute to fleet-level CAFE performance.
The list of recognised fuel-conservation technologies has also been expanded from four to 12. Eligible technologies can receive a concession of 1 g CO₂/km each, subject to a maximum concession of 9 g CO₂/km.
Cleaner vehicles get super credits
Battery electric vehicles (BEVs), range-extended electric vehicles (REEVs), plug-in hybrid electric vehicles (PHEVs), strong hybrid electric vehicles (SHEVs) and flex-fuel vehicles will receive volume derogation factors, or super credits, in fleet-average calculations.
The mechanism is designed to provide an additional incentive for manufacturers to increase the deployment and market penetration of cleaner and advanced vehicle technologies.
The framework also identifies technologies such as solar-reflective paints, advanced glazing and high-efficiency air-conditioning systems as potential pathways to improve vehicle efficiency.
Flexibility in compliance
Manufacturers will be allowed to meet their CAFE obligations through specified two-year and three-year compliance blocks. This is intended to provide greater flexibility in managing product portfolios and technology transitions.
Manufacturers that outperform their prescribed targets will be able to generate credits, which can be carried forward within the specified compliance blocks.
Those facing a compliance gap can use eligible carry-forward provisions, exchange or trade credits with other manufacturers, or purchase credits through the buyout mechanism administered by the Bureau of Energy Efficiency.
Dual testing framework
CAFE-III will use both the Modified Indian Driving Cycle (MIDC) and the Worldwide Harmonized Light Vehicles Test Procedure (WLTP) for reporting.
The dual approach is intended to facilitate India’s gradual transition towards globally harmonised vehicle testing practices while retaining the existing testing framework during the transition.
Manufacturers with annual sales of fewer than 1,000 units will remain exempt from fleet-average obligations.
Focus on energy security
Passenger vehicles account for a significant share of India’s transport energy demand and fossil-fuel consumption. The government expects the new CAFE framework to support reductions in fuel consumption while allowing manufacturers to choose among multiple technology and fuel pathways.
The Ministry said the norms have been finalised following consultations with automobile manufacturers, industry associations, academia and other stakeholders.
The framework is positioned as a technology-neutral approach that combines tighter efficiency requirements with incentives, credit mechanisms and technology choices as India’s passenger vehicle market moves towards greater electrification, alternative fuels and lower energy consumption.