Ministry of Power Circulates the Draft CAFE-III Norms for Consultation

The Ministry of Power has released the draft Corporate Average Fuel Economy (CAFE-III) norms for public consultation, as per a PIB report.  

The proposed regulations will apply to M1 category passenger vehicles manufactured or imported for sale in India between FY28 and FY32. Stakeholders and members of the public have been invited to submit comments before the norms are finalised. 

The M1 category includes passenger vehicles to carry up to eight people in addition to the driver. This covers most cars sold in India, including hatchbacks, sedans and SUVs. 

Implementation Proposed from April 2027 

According to the draft, the new norms are proposed to come into effect from April 1, 2027, after the current CAFE-II framework ends on March 31, 2027. The proposed standards will remain applicable for five financial years, ending in 2031-32. 

The draft provides for compliance to be assessed in two stages. The first review would cover the initial 3 years, while the second would cover the remaining 2 years.  

Fuel efficiency requirements are proposed to become more stringent during the implementation period. 

Credit System and Compliance 

As per news reports, a credit-based compliance mechanism has been proposed for manufacturers. Companies exceeding the prescribed fuel economy targets would be able to earn compliance credits, while those falling short could use available credits to meet the requirements. 

Each compliance credit has been proposed to carry a value of ₹2,500 in the first year, with the amount increasing by ₹500 every year.  

Credits that are not used within the compliance period would expire. The draft also provides for penalties in cases where manufacturers do not meet the prescribed targets. 

Support for Low-Emission Technologies 

The proposal includes additional compliance benefits for vehicles using lower-emission technologies. Super credits have been proposed for electric vehicles, hybrid vehicles and flex-fuel vehicles.  

The draft also recognises carbon neutrality benefits for ethanol, compressed biogas (CBG) and other biofuels. 

Manufacturers using approved fuel-saving technologies may receive compliance benefits of up to 9 grams of CO₂ per kilometre. Vehicle manufacturers selling fewer than 1,000 units annually have been proposed to remain outside the scope of the norms. 

Feedback Open Until August 6 

The Ministry has set August 6, 2026, as the last date for submitting comments on the draft. Suggestions can be sent to the Ministry's Energy Conservation Division through post or email.  

The draft will also be uploaded on the websites of the Ministry of Power and the Bureau of Energy Efficiency after circulation. 

Read More: CBDT Announces Cost Inflation Index for FY 2026-27! 

Conclusion 

The consultation process for the draft CAFE-III norms will remain open until August 6, 2026. The final rules will be notified after the Ministry reviews suggestions received from industry and the public. 

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