The Ministry of Electric Power has released the draft Corporate Average Fuel Economy (CAFE)-III specifications, proposing to implement stricter fuel efficiency standards for passenger cars from April 1, 2027. The draft is open for comment and will replace the existing CAFE-II specification, which is expected to remain in effect until March 31, 2027.The proposed regulations will apply to M1 category passenger vehicles manufactured or imported for sale in India from the financial year 2027-28 to the financial year 2031-32. This category includes passenger cars with up to eight seats, excluding the driver’s seat. Stakeholders and the public can submit suggestions and feedback to the Ministry of Power until August 6, 2026.One of the biggest changes under the proposed CAFE-III framework is the gradual tightening of fuel consumption targets over five years. The draft proposes to reduce the target from 3.996 liters per 100 kilometers (94.76 grams CO2/km) in the financial year 2027-28 to 3.3273 liters per 100 kilometers (78.90 grams CO2/km) in the financial year 2031-32. According to the government, this phased approach aims to provide carmakers with a clear roadmap to develop and launch more fuel-efficient models.Compliance with the new code will be assessed in two stages. The first compliance block will cover an initial three-year period, followed by a second block of two years. The government believes this structure will allow OEMs to gradually adapt to stricter efficiency requirements.The draft also proposes, for the first time, recognizing the carbon neutrality of alternative fuels. If implemented, ethanol, biofuels and compressed biogas (CBG) will receive stated specific reductions in exhaust CO2 emissions before compliance is assessed. For current ethanol blends, a carbon neutrality factor (CNF) of 8% is recommended, while reductions for CBG and other biofuels will depend on prevailing blending levels.Another key provision is incentives for energy-saving technologies. For approved technologies, manufacturers will be allowed to claim compliance benefits of up to 9g CO2/km, but benefits will be capped at 1g CO2/km per technology.
