As passenger vehicle makers intensify lobbying over the shape of the proposed third phase of Corporate Average Fuel Efficiency (CAFE-3) norms – due to take effect from April 1, 2027 – official data show that most manufacturers have failed to meet the current CAFE-2 standards, with penalties of Rs 8,771.3 crore remaining unrecovered between FY23 and FY25.
The issue has surfaced at a time when Maruti Suzuki India has argued for regulatory relief for small cars under CAFE-3, while other manufacturers including Tata Motors and Mahindra & Mahindra have taken a different view on the proposed framework.
Compliance Gap
Data accessed by FE show that 10 automakers were flagged by the Ministry of Power for breaching fleet emission limits under CAFE-2. These include Hyundai Motor India, Mahindra & Mahindra, Kia India, Honda Cars India, Renault India, Nissan Motor India, Skoda Auto Volkswagen India, Jaguar Land Rover and Isuzu Motors India.
Hyundai accounts for the largest share of penalties at over Rs 2,838 crore. Mahindra & Mahindra follows with Rs 1,788 crore, while Kia faces dues of Rs 1,346 crore and Honda Rs 1,228 crore. Renault and Nissan have penalties of Rs 834 crore and Rs 462 crore, respectively. Skoda Auto Volkswagen’s liability stands at Rs 248 crore. Tata Motors-owned Jaguar Land Rover has Rs 19 crore in dues, while Isuzu Motors India and Force Motors account for the smallest amounts among those cited.
Despite the accumulation of penalties, the Bureau of Energy Efficiency, which operates under the Ministry of Power and is responsible for verification and issuance of notices, has not referred any case to the adjudicating officer under the State Electricity Regulatory Commission for recovery of dues. Queries sent to the ministry remained unanswered till press time.
The bulk of penalties arose in FY23, when non-compliance resulted in Rs 7,291 crore in dues. This was followed by Rs 808 crore in FY24 and Rs 673 crore in FY25.
CAFE norms, introduced in 2017, apply to passenger vehicles weighing up to 3,500 kg and cover petrol, diesel, CNG, LPG, hybrid and electric powertrains. Manufacturers are required to meet annual fleet-wide fuel efficiency and emission targets, with compliance data submitted to the International Centre for Automotive Technology and shared with the ministries of power and road transport.
Regulatory Deadlock
Under CAFE-2, currently in force, automakers must limit average fuel consumption to 4.78 litres per 100 km and carbon dioxide emissions to 113 grams per km. The draft CAFE-3 proposal envisages a sharper trajectory, tightening limits to 3.25 litres per 100 km and 77.08 grams of COâ‚‚ per km by FY32.
Amendments to the Energy Conservation Act in December 2022 introduced penalties of Rs 25,000 per vehicle for minor deviations and Rs 50,000 per vehicle for significant non-compliance, in addition to a base fine of Rs 10 lakh. These provisions have been retained in the proposed CAFE-3 framework.
While compliance data up to FY22 is publicly available, information from FY23 onwards has not been published on the ministry’s website, even as discussions on the next phase of norms continue.
