Power Ministry Releases Revised CAFE III Draft

The Ministry of Power has issued a revised draft of the Corporate Average Fuel Economy (CAFE) 2027 regulations for passenger vehicles, retaining a credit trading mechanism while adding implementation details for fuel-efficiency standards.

The draft will apply to M1-category passenger vehicles from April 1, 2027, and public comments are invited within 21 days before the rules are finalised. Industry experts said the new draft relaxes overall fuel efficiency target and takes a balanced approach, compared to the earlier draft.

The fuel consumption targets are proposed to be progressively tightened, from 3.996 litres/100 km (94.76 gCO/km) in 2027-28 to 3.3273 litres/100 km (78.90 gCO/km) in 2031-32, the official said.

Under the proposal, manufacturers that exceed their prescribed fuel-efficiency targets will earn compliance credits, while those falling short will incur debits. 

Companies can trade credits with other manufacturers or buy credits from the Bureau of Energy Efficiency (BEE) to offset any debit balance. The buyout price has been proposed at Rs 2,500 per gram of CO2 per kilometre for the financial year 2028, progressively increasing it to Rs 4,500 by the financial year 2032.

The draft also finalises the technical criteria for manufacturers to claim fuel-efficiency benefits for technologies such as start-stop systems, regenerative braking, tyre pressure monitoring systems, LED lighting, electric water pumps, high-efficiency air-conditioning systems and advanced glazing.

It retains incentives for battery electric vehicles, plug-in hybrid vehicles, strong hybrids and flex-fuel vehicles through super credits and carbon neutrality factors while continuing to base compliance on manufacturers' fleet-average fuel consumption.

Manufacturers will be required to report vehicle performance under both the Modified Indian Driving Cycle (MIDC) and the Worldwide Harmonized Light Vehicles Test Procedure (WLTP). The ministry said a separate conversion factor between the two test cycles will be notified later.

The revised draft advances the compliance timeline by requiring credit trading and buyouts to be completed by September 30 of each assessment year, with the final passbook to be submitted by October 31. It also states that proceeds from the sale of BEE credits, along with penalties collected under the Energy Conservation Act, will be credited to the Central Energy Conservation Fund.