CAFE III draft: What's changing and why it matters
What's the story
The Indian government is gearing up to tighten fuel-efficiency norms for passenger vehicles, with the release of a new draft for the Corporate Average Fuel Economy (CAFE) III regulations. The Ministry of Power has issued this latest version, which will set fuel-consumption standards for passenger vehicles from 2027-28 to 2031-32. The draft is now open for public consultation before being finalized.
Compliance details
Introducing a market-based compliance mechanism
The proposed CAFE III framework introduces a market-based compliance mechanism, incentives for fuel-saving technologies, and benefits for alternative fuels.
It aims to reduce fuel consumption and carbon dioxide (CO2) emissions across India's rapidly evolving passenger vehicle market.
The new regulations will apply to all automakers, regardless of their technology choices, be it internal combustion engines (ICEs), hybrids, flex-fuels, or battery electric vehicles (BEVs).
Regulatory focus
Difference between CAFE and Bharat Stage (BS) norms
Unlike Bharat Stage (BS) norms that regulate pollutants from individual vehicles, CAFE focuses on the average fuel efficiency of an automaker's entire passenger vehicle portfolio.
This allows manufacturers to choose how they meet targets, through better engines, lighter vehicles, hybrids, alternative fuels, or electric vehicles.
The proposed framework is less stringent for manufacturers with lighter passenger vehicle portfolios while increasing compliance pressure on companies with heavier fleets.
Compliance tracking
Digital compliance account for manufacturers
CAFE III also introduces a digital compliance account, or "passbook," for every manufacturer. This will track credits and debits based on their performance against the prescribed fleet-average fuel-consumption targets.
If a company exceeds its target, it earns credits that can be banked for future compliance periods or traded with other manufacturers through voluntary pooling.
If there's still a compliance deficit after using available credits, it can buy from the Bureau of Energy Efficiency (BEE) at government-notified prices.
Technology emphasis
Proposed framework recognizes multiple technology pathways
The proposed CAFE III framework also emphasizes cleaner vehicle technologies.
It gives additional weight to battery electric vehicles and plug-in hybrids while calculating a manufacturer's fleet average.
The draft allows manufacturers to discount a portion of a vehicle's declared CO2 emissions while calculating compliance.
This way, it recognizes multiple technology pathways instead of focusing only on pure electric vehicles.
Testing transition
Transition to Worldwide Harmonized Light Vehicles Test Procedure (WLTP)
The proposed framework also calls for a gradual transition to the Worldwide Harmonized Light Vehicles Test Procedure (WLTP).
Currently, India's fuel-efficiency standards are based on the Modified Indian Driving Cycle (MIDC).
Under this new draft, manufacturers will continue using MIDC but also report fuel consumption and CO2 emissions under WLTP for every model.
This dual-reporting requirement is intended to help regulators collect real-world data before making a complete transition.