The Centre has released a draft of the Corporate Average Fuel Efficiency (CAFE)-III norms, proposing stricter fuel efficiency and carbon emission targets for passenger vehicles starting April 1, 2027. The draft introduces special recognition for ethanol and biofuels, allowing manufacturers to claim reduced tailpipe emissions for compliance.
Stakeholders have until August 6 to submit feedback. The proposal has divided the automobile industry, with smaller and larger vehicle manufacturers at odds over regulatory framing.
Stricter Fuel Efficiency Targets Under CAFE-III
Under the draft, manufacturers must improve fleet fuel efficiency progressively. Targets include:
- 3.996 litres per 100 km (94.76 gCO₂/km) in 2027-28
- 3.327 litres per 100 km (78.90 gCO₂/km) by 2031-32
Ethanol and Biofuel Incentives
The draft introduces Carbon Neutrality Factors (CNFs) to account for the lower lifecycle carbon footprint of renewable fuels like ethanol and compressed biogas (CBG). Manufacturers can reduce declared tailpipe CO₂ emissions before compliance assessment, with an 8% reduction proposed for current ethanol blending levels. CBG and other biofuels will see reductions based on prevailing blending rates.
Additional incentives include compliance benefits of up to 9 gCO₂/km for fuel-saving technologies, capped at 1 gCO₂/km per approved technology. Super credits are also proposed for electric and hybrid vehicles, including BEVs, REEVs, PHEVs, SHEVs, and FFVs, to encourage cleaner technologies.
Compliance will be assessed over two blocks: a three-year initial period followed by a two-year block. Manufacturers exceeding targets can carry forward compliance credits within these blocks.
