Govt Notifies New CAFE Norms to Boost Vehicle Fuel Efficiency
India sets new CAFE norms targeting 16.7% better fuel efficiency for passenger vehicles by 2032 to promote cleaner technologies.
In a significant move to accelerate the transition toward cleaner mobility, the Indian government has officially notified new Corporate Average Fuel Economy (CAFE) norms for passenger vehicles. These regulations aim to drive a 16.7 per cent improvement in fuel efficiency over the next five years, pushing the automotive sector toward greener technologies, hybrids, and electric vehicles.
The new framework, notified by the Ministry of Power, is set to take effect from April 1, 2027, and will remain in force until March 31, 2032. The mandate applies to all new passenger vehicles, whether they are manufactured domestically or imported for sale in the Indian market.
Stricter Benchmarks and Progressive Targets
The core of the new policy lies in its progressive tightening of fuel consumption standards. Rather than a static target, the government has introduced a sliding scale that becomes increasingly demanding each year:
- 2027-28: The benchmark starts at 3.996 litres per 100 km.
- 2031-32: The target tightens to 3.3273 litres per 100 km.
This trajectory ensures a steady climb toward higher efficiency. Additionally, the government has adjusted the reference weight used for these calculations, increasing it from 1,082 kg to 1,229 kg—a rise of approximately 13.6 per cent. This adjustment is strategic; it provides relatively easier targets for lighter vehicles while imposing much stricter fuel-efficiency requirements on heavier models.
Flexibility Through Technology and Carbon Neutrality
Recognizing the diverse technological landscape, the new framework offers automobile manufacturers significant flexibility. A key feature is the introduction of a Carbon Neutrality Factor, which acknowledges the use of low-carbon and renewable fuels such as:
- Ethanol-blended petrol
- Biofuels
- Compressed Biogas (CBG)
The scope of recognized fuel-conservation technologies has also seen a massive expansion, growing from just four to 12 different technologies. For every eligible technology used, manufacturers can claim a concession of 1 gram of CO2 per km, up to a maximum limit of 9 grams of CO2 per km.
The "Super Credit" Advantage for EVs and Hybrids
To incentivize the rapid deployment of zero-emission and low-emission vehicles, the government is introducing "super credits". Through volume derogation factors, the following vehicle types will receive special advantages in fleet-average calculations:
- Battery electric vehicles (BEVs)
- Range-extended electric vehicles
- Plug-in hybrids
- Strong hybrids
- Flex-fuel vehicles
Compliance and Credit Trading Mechanisms
To ensure the industry can adapt without sudden shocks, the ministry has introduced a flexible compliance system. Manufacturers can meet their obligations through specified two-year or three-year compliance blocks. The system also allows for a market-based approach to meeting targets:
- Carrying Forward: Companies that exceed their efficiency targets can carry forward their excess credits.
- Credit Trading: Manufacturers facing a shortfall can use eligible credits or trade credits with other companies.
- Buyout Mechanism: If a manufacturer cannot meet the gap through trading, they can purchase credits through a buyout mechanism managed by the Bureau of Energy Efficiency.
The Ministry of Power stated that this new framework provides much-needed regulatory clarity and technological choice, supporting the passenger vehicle sector's vital transition toward lower fuel consumption and enhanced energy efficiency.