Tata Motors Passenger Vehicles (TMPV) has opposed the Ministry of Power’s proposal to allow the Bureau of Energy Efficiency (BEE) to sell compliance credits under the proposed Corporate Average Fuel Efficiency (CAFE) credit-debit mechanism, arguing that the move would distort the market for credits earned by compliant automakers and weaken incentives to invest in cleaner vehicle technologies.
In its submission on the draft amendments to the CAFE-II framework, the company said BEE should remain only the regulator, verifier and facilitator of the proposed credit market, while compliance credits should be generated exclusively by manufacturers that exceed the notified fuel-efficiency targets.
“BEE should regulate, verify and administer the credit-debit mechanism, but should not itself become a seller of Credits in that market,” TMPV said in a July 14 letter to the Secretary, Ministry of Power.
Underpricing Compliance Risks
The objection centres on the proposed provision allowing manufacturers to purchase credits directly from BEE at a fixed price of ₹2,500 per gram of CO₂ per kilometre, while the statutory consequence for non-compliance under the Energy Conservation Act is around ₹5,000 per gram of CO₂ per kilometre.
Allowing BEE to create and sell credits would result in an unlimited supply of such credits, undermining the value of credits earned by manufacturers through genuine over-compliance. This would mean that automakers who are investing in cleaner technologies to reduce emissions could struggle to find buyers for their credits, or be forced to sell them below BEE’s administered price, preventing market-based price discovery.
The company said manufacturers exceeding emission targets should be allowed to sell their surplus credits first, with prices determined by market demand. “The credit pricing mechanism should be such that credits should be priced so that non-compliance is not made cheaper than compliance,” TMPV said.
The company further argued that if BEE creates credits merely against payment, without any corresponding improvement in vehicle emissions, such credits would not have the same character as those earned through verified over-compliance.
The company also contended that the statutory consequence under the Energy Conservation Act should come into play only after all credits generated by over-compliant manufacturers have been exhausted.
Under the CAFE-II regime, penalties of ₹8,771.3 crore were initially imposed on automakers for non-compliance between FY23 and FY25. Data accessed by Financial Express showed that 10 manufacturers, including 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, were flagged by the Ministry of Power for breaching fleet emission limits. According to sources, the penalty was later revised down to around ₹2,700 crore.
Conflict of Interest
TMPV further argued that a credible credit market requires the regulator to remain independent and neutral. “If BEE itself supplies Credits, it would become, at the same time, the regulator, the market administrator, the price-setter and a counterparty in the very market that it supervises,” Tata said.
Apart from opposing BEE’s role as a credit seller, TMPV has also urged the government to allow compliance credits earned through verified over-compliance to be carried forward into subsequent compliance blocks instead of lapsing at the end of the current cycle.
The company argued that these credits represent investments already made and environmental gains already delivered. Allowing them to expire at the end of the FY23-FY27 compliance block would discourage manufacturers from exceeding fuel-efficiency targets in future compliance cycles.
