Draft CAFE-III Norms for Vehicle Fuel Efficiency

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The Ministry of Power and the Bureau of Energy Efficiency (BEE) have released the Draft Corporate Average Fuel Economy-III (CAFE-III) norms for public and industry feedback.

Corporate Average Fuel Efficiency (CAFE) rules force vehicle makers to meet a set average for fuel savings and CO2 emissions across their entire annual fleet of vehicles sold, instead of rating each car model separately.

Phase I (CAFE-I) began in FY2017-18 to set the first baseline for tracking vehicle fleet efficiency.
Phase II (CAFE-II) started in FY2022-23 and introduced stricter emission rules based on average vehicle weight.
Phase III (CAFE-III) was issued in July 2026 and will take effect on April 1, 2027, running until FY2031-32.

The government applies these rules under the Energy Conservation Act to reduce air pollution, cut greenhouse gases, and lower crude oil imports by encouraging cleaner vehicles.

Carbon emission targets will become much stricter, falling from 3.996 liters/100 km (94.76 gCO₂/km) in FY2027-28 to 3.327 liters/100 km (78.90 gCO₂/km) by FY2031-32.
The draft replaces the old lab-based Modified Indian Driving Cycle (MIDC) with the global Worldwide Harmonised Light Vehicles Test Procedure (WLTP) to match real road conditions.
Automakers get flexibility through multi-year compliance blocks, split into a three-year block (FY28-30) and a two-year block (FY30-32), giving them time to launch electric vehicles.
India introduces Carbon Neutrality Factors (CNFs) for the first time, giving an 8% credit benefit to E20 fuel and up to 22.3% to flex-fuel ethanol cars and flex-fuel hybrids.
Revised super-credit incentives grant a 3.0x multiplier for Battery Electric Vehicles (BEVs) and Range-Extended EVs, 2.5x for Plug-in Hybrids, and 1.6x for Strong Hybrids.
A credit trading market lets companies that perform better than their emission targets earn compliance credits and sell them to other manufacturers.
Companies can claim up to 9 gCO₂/km in benefits by using 12 approved fuel-saving features, such as automatic engine start-stop, regenerative braking, smart alternators, and Tire Pressure Monitoring Systems (TPMS).