Will Your Next Car Consume Less Fuel? India Unveils Draft CAFE-III Norms

The Ministry of Power on Thursday released the draft Corporate Average Fuel Economy (CAFE-III) norms for public and stakeholder consultation, proposing a new five-year fuel efficiency framework for passenger vehicles from April 1, 2027.

The revised standards aim to improve vehicle fuel economy, lower emissions and support India’s transition towards cleaner and more sustainable transport.

The proposed regulations apply to M1 category vehicles, which include passenger cars designed to carry up to eight people in addition to the driver.

The norms cover personal-use hatchbacks, sedans and SUVs, while excluding commercial vehicles and buses.

After the current CAFE-II norms expire on March 31, 2027, the Bureau of Energy Efficiency will implement the new five-year framework, requiring progressively stricter fuel efficiency targets to reduce vehicle emissions and fuel consumption.

To encourage compliance, the proposal introduces a system of compliance credits priced at ₹2,500 each, with the value increasing by ₹500 annually during the implementation period.

Manufacturers can earn and use these credits to meet regulatory requirements, although unused credits will expire once the compliance period ends.

Automakers failing to achieve the prescribed targets could face penalties, while manufacturers selling fewer than 1,000 vehicles annually will remain exempt from the norms.

The draft has received mixed reactions from the automobile industry. While SIAM has backed the proposal, some manufacturers have sought concessions for small petrol cars.

The Ministry of Power has invited public and industry feedback until August 6, 2026, after publishing the draft on its and the Bureau of Energy Efficiency’s websites.

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