Though small cars can claim an extra reduction of 3.0 grams carbon dioxide per km, the draft CAFE norms announced last week caps it at 9.0 gm/km. It signals that even small-car makers such as Maruti Suzuki will need to enhance their efficiency to avoid penalties, explains Nitin Kumar
Objective of CAFE norms
Corporate Average Fuel Efficiency or CAFE norms were first introduced in 2017 under the Energy Conservation Act, 2001, as part of India’s efforts to curb fossil fuel dependence and air pollution from road transport. Issued by the Bureau of Energy Efficiency (BEE), the fuel efficiency regulations apply to M1 category vehicles—passenger cars with seating for up to nine persons and a maximum weight of 3,500 kg.
The regulations set limits on corporate average fuel consumption, measured in litres per 100 kilometres, based on the average weight of vehicles sold by an automaker during a financial year. Since fuel consumption and carbon dioxide (CO2) emissions are directly linked, the rules aim to reduce carbon intensity by pushing companies to improve the efficiency of their overall fleet.
The first phase, implemented in 2017–18, capped average fuel consumption at 5.5 litres/100 km and emissions at <130 gm CO2/km. The second phase, in force since 2022–23, tightened this to 4.78 litres/100 km and <113 gm CO2/km.
What do the draft norms propose?
The third iteration, announced last week, builds on the previous two stages. Called CAFE 3 or CAFE 2027, the proposed regulations are aimed at tightening fuel consumption standards, reducing carbon emissions, and encouraging auto makers to adopt cleaner technologies to support India’s climate goals.
The proposed CAFE 3 norms further ramp up ambition: over the five-year period from FY28 to FY32, the permissible fuel consumption will fall to a range between 3.7264 and 3.0139 litres/100 km, while emissions are estimated to reduce to below 91.7 gm CO2/km.
While the tapering targets of 3.7264 litres to 3.0139 litres over the five-year period offer gradual adjustment, OEMs say year-on-year changes make product planning and compliance difficult. “It’s like chasing a moving target,” said a senior auto executive.
Small relief for small cars
Interestingly, the weight benchmark under CAFE 3 has also been revised upward to reflect market trends. The average kerb weight used for calculating standards will increase to 1,170 kg, up from 1,082 kg under CAFE 2 and 1,037 kg in CAFE 1. This adjustment reflects the growing consumer preference for heavier vehicles such as SUVs and electric cars, which, despite their weight, are generally safer and offer more features.
The draft norms thus offer targeted relaxations for small petrol cars. The draft allows additional concessions for cars with unladen mass up to 909 kg, engine capacity not exceeding 1,200 cc, and length under 4,000 mm. These vehicles can claim an extra reduction of 3.0 gm CO2/km, capped at 9.0 gm/km in any reporting period. Though the relaxation is significant, capping it at 9.0 gm/km in any reporting period offers only limited relief. It also signals that small-car makers such as Maruti Suzuki will need to enhance their efficiency to avoid penalties. The car-maker had been lobbying in favour of relaxed emission norms for smaller hatchback cars, a segment that is seeing declining sales.
Clean tech gets biggest boost
Cleaner powertrains get the highest incentives. The draft introduces a system of “super credits,” where low- or zero-emission vehicles count multiple times in an automaker’s fleet average. Battery electric vehicles (EVs) and range-extender hybrids will be counted three times, plug-in hybrids 2.5 times, and strong hybrids twice. Flex-fuel vehicles, running on ethanol blends, receive a multiplier of 1.5. Companies such as Tata Motors and Mahindra that sell EVs, could benefit from this.
A new metric called the Carbon Neutrality Factor (CNF), which provides further emissions relaxation based on the type of fuel used, has been introduced. Petrol vehicles running on E20 to E30 blends will get an 8% reduction in their tailpipe CO2 figures. Flex-fuel and strong hybrid vehicles will get a 22.3% deduction, while CNG vehicles will be eligible for a 5% CNF, or higher based on the share of compressed biogas in the fuel mix. However, the silence on hydrogen technology raised concerns about its future in the passenger vehicle segment and could undermine India’s broader hydrogen mission.
Emissions pooling introduced
Another new concept introduced in the draft is emissions pooling. Under this provision, up to three manufacturers can form a pool and be treated as a single entity for compliance purposes. This allows a company with a less efficient fleet to offset its emissions by pooling with one that sells cleaner vehicles, effectively averaging their performance. While this aims to foster collaboration—particularly between legacy automakers and EV-focused players—critics argue it could let polluting firms sidestep penalties without making real technological progress.