India notifies CAFE-III fuel efficiency norms for passenger vehicles

The Ministry of Power has notified the Corporate Average Fuel Economy (CAFE)-III norms for passenger vehicles, which are scheduled to be implemented from April 1, 2027, through March 31, 2032. This regulatory framework aims to reduce energy consumption and CO2 emissions by progressively tightening fuel-consumption targets.

Under the new norms, fuel efficiency targets will improve from 3.996 litres per 100 km in 2027–28 to 3.3273 litres per 100 km by 2031–32, representing an improvement of approximately 16.7% to 17% over the five-year period. The framework includes several compliance mechanisms, such as super credits for electric vehicles (3x), plug-in hybrids (2.5x), and strong hybrids (1.6x), as well as carbon neutrality factors for ethanol-blended and flex-fuel vehicles.

An ICRA report suggests the potential fuel savings from these measures could reach approximately ₹38,000 crore. To meet these stringent standards, original equipment manufacturers (OEMs) are expected to increase the penetration of electric and hybrid vehicles, adopt new efficiency technologies, and utilize credit trading mechanisms.