India releases draft CAFE‑III fuel‑efficiency standards for passenger cars (2027‑32)

The Ministry of Power has issued a draft notification of Corporate Average Fuel Efficiency III (CAFE‑III) for M1‑category passenger vehicles. The rules would apply to cars, hatchbacks, sedans and SUVs sold in India from the 2027‑28 to 2031‑32 financial years. Fleet‑average fuel consumption targets are to tighten from 3.996 L/100 km (≈94.8 g CO₂/km) in 2027‑28 to 3.327 L/100 km (≈78.9 g CO₂/km) by 2031‑32. Compliance will be assessed in two periods – an initial three‑year block followed by a two‑year block – with a credit price of ₹2,500 per compliance credit, rising ₹500 each year. Manufacturers selling fewer than 1,000 units annually are exempt.

The draft also introduces Carbon Neutrality Factors for vehicles using ethanol, bio‑fuels or compressed bio‑gas, and offers super‑credits for battery‑electric, plug‑in hybrid, range‑extended electric and strong‑hybrid models to encourage cleaner‑technology uptake. Non‑compliant firms could face penalties, while excess credits may be traded. The government has opened the draft for public comment until 6 August 2026, seeking industry and citizen feedback.

The proposed standards aim to lower vehicular emissions, reduce India's reliance on imported oil and accelerate the transition toward electric and alternative‑fuel vehicles.