The government has introduced new Corporate Average Fuel Economy (CAFE) norms for passenger vehicles, with the rules aimed at improving fuel efficiency by 16.7 per cent over five years. The framework is intended to encourage cleaner technologies, alternative fuels, electric vehicles and hybrid models across India’s automobile sector.
The new regulations, notified by the Ministry of Power, will come into effect on April 1, 2027, and remain applicable until March 31, 2032. They will cover new passenger vehicles manufactured or imported for sale in India, according to the ministry.
Fuel Efficiency Targets to Become Stricter
Under the revised CAFE framework, fuel-consumption targets will become progressively tighter each year. The benchmark will decline from 3.996 litres per 100 km in 2027-28 to 3.3273 litres per 100 km in 2031-32, amounting to an improvement of about 16.7 per cent over the five-year period.
The government has also raised the reference vehicle weight used to determine the targets from 1,082 kg to 1,229 kg, an increase of around 13.6 per cent.
The revised target structure is expected to provide comparatively less stringent targets for lighter vehicles, while heavier passenger vehicles will face higher fuel-efficiency requirements.
More Technologies and Cleaner Fuels Recognised
The new framework gives automobile manufacturers greater flexibility in selecting technologies to meet their fleet-level efficiency requirements.
It also recognises renewable and low-carbon fuel options, including ethanol-blended petrol, biofuels and compressed biogas (CBG), through a Carbon Neutrality Factor.
The number of recognised fuel-conservation technologies has been expanded from four to 12. Manufacturers can receive a concession of 1 gram of CO2 per km for each qualifying technology, subject to a maximum concession of 9 grams of CO2 per km.
Super Credits for EVs and Hybrid Vehicles
The revised CAFE framework provides volume derogation factors, commonly referred to as “super credits”, for several cleaner vehicle technologies. These include battery electric vehicles, range-extended electric vehicles, plug-in hybrids, strong hybrids and flex-fuel vehicles.
The provision is designed to encourage automobile manufacturers to increase the adoption and deployment of cleaner vehicle technologies.
Credit Trading Offers Compliance Flexibility
Manufacturers will also have additional flexibility in meeting their CAFE obligations through specified two-year or three-year compliance blocks.
Companies that exceed their targets will be able to carry forward credits. Manufacturers facing compliance gaps can use eligible credits, trade credits with other companies or purchase credits through a buyout mechanism administered by the Bureau of Energy Efficiency.
The Ministry of Power said the revised framework offers greater regulatory clarity, wider technology choices and additional compliance flexibility while supporting the passenger vehicle industry’s shift towards improved energy efficiency and reduced fuel consumption.
Disclaimer
This article is based on information provided in a syndicated report and official government communication referenced in the report. It is intended for general informational purposes only. Readers should verify regulatory requirements and related developments from official sources before making business or investment decisions.