CAFE-3 Norms
Why in News?
India’s Ministry of Power has notified the third phase of Corporate Average Fuel Economy (CAFE-3) norms on 29 September 2026, ending over two years of industry debate on how to balance small cars, SUVs, and electric vehicles (EVs) under one fuel-efficiency framework.
Timeline and Scope
- Implementation Period: The CAFE-3 norms will be effective from April 1, 2027, to March 31, 2032.
- Applicability: They apply strictly to new M1 category passenger vehicles (vehicles with up to 8 seats, excluding the driver) manufactured or imported for sale in India.
- Exemptions: Small-volume manufacturers selling fewer than 1,000 units annually are exempt from meeting specific targets but must still report data. It does not affect current car owners.
Stricter Targets & Metrics
- Fleet-Average System: Carmakers are judged on the overall efficiency of their entire annual sales portfolio, not individual car models.
- Tightening Benchmarks: The fuel-consumption target will systematically tighten from 3.996 litres/100 km (in 2027–28) down to 3.3273 litres/100 km (by 2031–32). This represents a 16.7% efficiency improvement.
- Reference Weight: The calculations will use a standard reference vehicle unladen weight of 1,229 kg.
- Testing Dual-Reporting: Fuel efficiency will be measured using India's existing Modified Indian Driving Cycle (MIDC) test while simultaneously reporting under the global Worldwide Harmonized Light Vehicles Test Procedure (WLTP) to transition toward international standards.
The "Super-Credit" Multiplier System
To encourage cleaner powertrains, the government uses a multiplier system where selling one clean vehicle counts as multiple vehicles in a manufacturer’s fleet average:
To encourage cleaner powertrains, the government uses a multiplier system where selling one clean vehicle counts as multiple vehicles in a manufacturer’s fleet average:
- 3.0x Multiplier: Battery Electric Vehicles (BEVs) and range-extended EVs.
- 2.5x Multiplier: Plug-in hybrids and flex-fuel strong hybrids.
- 1.6x Multiplier: Regular strong hybrids.
- 1.1x Multiplier: Flex-fuel ethanol vehicles.
Compliance, Credits, and Penalties
- Compliance Blocks: The 5-year timeline is divided into two blocks: Block 1 (FY28 to FY30) and Block 2 (FY31 to FY32).
- Credit Trading: Automakers can accumulate, carry forward, or trade compliance credits with other manufacturers within a block. Unused credits lapse at the end of a block.
- Steep Financial Penalties: For manufacturers failing to meet the targets, buyout/penalty prices will start at ₹2,500 and rise to ₹4,500 per gram of CO₂/km by FY32.
Technological & Fuel Flexibilities
- Recognised Innovations: The number of approved fuel-saving technologies has expanded from 4 to 12. Features like automatic start-stop, regenerative braking, tyre-pressure monitoring, solar-reflective paint, and high-efficiency AC systems can give automakers up to a 9 g COâ‚‚/km reduction credit.
- Alternative Fuel Recognition: Tailpipe COâ‚‚ calculations will account for Carbon Neutrality Factors, giving reductions for vehicles utilizing ethanol-blended petrol, compressed biogas (CBG), and other biofuels.
