The Centre has proposed tighter fuel efficiency standards for passenger vehicles under the third phase of the Corporate Average Fuel Efficiency (CAFE) regulations. In the draft CAFE-III norms released for stakeholder consultation by the Union Power Ministry on Thursday, the government has proposed progressively tightening fleet-average fuel consumption targets, reducing the benchmark from 3.996 litres per 100 km (94.76 grams of carbon dioxide per km) in 2027-28 to 3.3273 litres per 100 km (78.90 grams of CO2 per km) by 2031-32.
The Centre has proposed the new norms to take effect from April 1, 2027, after the current CAFE-II regime expires on March 31, 2027. These will remain in force for five years and compliance would be assessed over two blocks -- an initial three-year period followed by a two-year period.
The proposed regulations would apply to M1 category passenger vehicles having not more than eight seats in addition to the driver's seat, that are manufactured or imported for sale in India during the 2027-28 to 2031-32 period.
The proposal introduces Carbon Neutrality Factors (CNFs), allowing specified reductions in declared tailpipe CO2 emissions for vehicles using ethanol, biofuels and Compressed Bio-Gas (CBG). An 8% CNF has been proposed for current ethanol blending levels, while reductions for CBG and other biofuels would be linked to prevailing blending levels.
The proposed framework also includes that battery electric vehicles, range-extended electric vehicles, plug-in hybrid electric vehicles, strong hybrid electric vehicles and flex-fuel vehicles will receive volume derogation factors (super credits) while calculating fleet average fuel consumption, thereby encouraging greater market penetration of cleaner technologies.
Manufacturers will be eligible to claim up to 9.0 gCO2/km fuel consumption reductions for approved fuel saving technologies (1gCO2/km per technology). These include automatic start-stop systems, regenerative braking, tyre pressure monitoring systems, efficient alternators, LED lighting, efficient airconditioning systems, advanced glazing, solar reflective coatings etc. subject to prescribed technical criteria.
A credit-and-debit mechanism has also been proposed under which manufacturers exceeding their prescribed targets would earn compliance credits that can be carried forward within a compliance block. Automakers falling short of their targets could meet their obligations through carry-forward provisions, voluntary pooling arrangements with other manufacturers or by purchasing compliance credits from the Bureau of Energy Efficiency (BEE).
The proposal sets an initial buyout price of Rs 2,500 for each compliance credit, with the price rising by Rs 500 annually. Credits would lapse if left unused at the end of a compliance block. Manufacturers failing to comply with the norms would be liable for penalties under the Energy Conservation Act, while passenger vehicle makers with annual sales of fewer than 1,000 units would remain exempt.
The Ministry of Power has invited comments from stakeholders and the public on the draft norms until August 6.