Govt releases draft CAFE 2027 norms, seeks stakeholder comments

Draft norms propose tighter fuel-efficiency targets from FY28 to FY32, compliance credits, super credits for cleaner vehicles and incentives for renewable fuels

The Centre on Thursday released the draft Corporate Average Fuel Efficiency (CAFE) 2027 norms for passenger vehicles, proposing progressively tighter fuel-efficiency standards between FY28 and FY32 while introducing new compliance mechanisms such as volume derogation factors for cleaner vehicles, carbon-neutrality benefits for renewable fuels and tradable compliance credits. The Ministry of Power has invited comments and suggestions from stakeholders and the public over the next 21 days before finalising the framework.

 

The proposed norms will apply to M1-category passenger vehicles manufactured or imported for sale in India from April 1, 2027. Passenger vehicles with up to eight seats, excluding the driver's seat, fall under the M1 category.

 

The government said the revised framework builds on the performance of the previous two CAFE cycles, noting that the industry had exceeded the prescribed fuel-efficiency targets by 10 per cent under CAFE Cycle I and 9 per cent under CAFE Cycle II. The explanatory note described the proposal as "a significant evolution of India's passenger vehicle fuel-efficiency framework", integrating fleet-based standards, recognition of renewable fuels, technology incentives, super credits for advanced vehicles and flexible compliance mechanisms.

 

The draft proposes progressively tighter manufacturer-specific fuel-consumption targets from FY28 to FY32 while continuing to link compliance to the weighted average unladen mass of vehicles sold by each manufacturer. It also lays down a five-year roadmap aimed at providing manufacturers with greater visibility for technology adoption and product planning.

 

Among the key changes is the introduction of "volume derogation factors", or super credits, for cleaner powertrains while calculating fleet-average compliance. Battery electric vehicles and range-extended electric vehicles will receive a multiplier of 3.0, plug-in hybrid electric vehicles and flex-fuel strong hybrids 2.5, strong hybrids 1.6, and flex-fuel ethanol vehicles 1.1.

 

The framework also proposes Carbon Neutrality Factors (CNFs), allowing specified reductions in declared tailpipe carbon dioxide emissions for renewable fuels before compliance assessment. Vehicles compatible with E20 petrol, including strong hybrids and plug-in hybrids, will receive an 8 per cent adjustment, while flex-fuel ethanol vehicles and flex-fuel strong hybrids will receive a 22.3 per cent adjustment. CNG vehicles will receive a 5 per cent adjustment or the notified compressed biogas blending percentage, whichever is higher.

 

Manufacturers deploying approved fuel-saving technologies will be eligible to claim compliance benefits of 1 g CO₂/km per technology, subject to an overall cap of 9 g CO₂/km. Eligible technologies include automatic start-stop systems, regenerative braking, tyre-pressure monitoring systems, six-speed or higher transmissions, efficient alternators, LED lighting, advanced glazing and high-efficiency air-conditioning systems.

 

The draft also proposes a formal compliance-credit mechanism. Manufacturers exceeding their prescribed targets will generate credits that can be carried forward within the applicable compliance block or traded with other manufacturers. Those falling short may also purchase credits from the Bureau of Energy Efficiency, with prices proposed at ₹2,500 per g CO₂/km in FY28, rising to ₹4,500 per g CO₂/km by FY32. Compliance will be assessed over an initial three-year block, followed by a two-year block.

 

While compliance will continue to be based on the Modified Indian Driving Cycle (MIDC), manufacturers will have to report vehicle performance under both MIDC and the Worldwide Harmonised Light Vehicles Test Procedure (WLTP) for models sold from April 1, 2026, ahead of a future transition to the globally harmonised test procedure. Manufacturers selling fewer than 1,000 passenger vehicles annually will continue to remain exempt from fleet-average compliance obligations.