The Centre has notified the third phase of Corporate Average Fuel Economy (CAFE-3) norms for passenger vehicles for the five years beginning April 1, 2027. Battery electric vehicles will count as three vehicles when a carmaker's fleet average is calculated.
The norms apply to M1 category motor vehicles as specified under the Central Motor Vehicle Rules, 1989, and remain in force from April 1, 2027 to March 31, 2032.
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According to the notification, the Ministry of Road Transport and Highways (MoRTH) will enforce the provisions on testing and calculation methods, reporting, conformity of production, carbon neutrality factors and the derogation factors, in consultation with the concerned ministries and departments.
Fuel consumption targets for carmakers
Each manufacturer's annual average fuel consumption standard will be calculated on the Modified Indian Driving Cycle (MIDC) in petrol-equivalent litres per 100 km. The Gazette gives the formula as a x (W - b) + c. Here, W is the weighted average unladen mass, in kg, of all new vehicles the manufacturer makes or imports for sale in India, and b is fixed at 1,229 kg.
The value of a falls from 0.00158 in 2027-28 to 0.00131 in 2031-32. The value of c falls from 3.9960 to 3.3273 litres per 100 km over the same period. The full schedule is as follows:
- 2027-28: a is 0.00158 and c is 3.9960
- 2028-29: a is 0.00152 and c is 3.8600
- 2029-30: a is 0.00148 and c is 3.7585
- 2030-31: a is 0.00139 and c is 3.5313
- 2031-32: a is 0.00131 and c is 3.3273
For a fleet with a weighted average unladen mass of 1,229 kg, the standard is therefore 3.996 litres per 100 km in 2027-28 and 3.3273 litres per 100 km in 2031-32.
The notification requires that a manufacturer's annual average of actual fuel consumption be less than or equal to its standard in every fiscal year from April 1, 2027.
How actual fuel consumption will be measured
Actual fuel consumption for each model will be worked out from its tailpipe CO2 emissions in grams per km, as per type approval. The Gazette specifies the following multipliers:
- Petrol: 0.04217 x CO2, in litres per 100 km
- Diesel: 0.03776 x CO2, in litres per 100 km
- LPG: 0.06150 x CO2, in litres per 100 km
- CNG: 0.03647 x CO2, in kg per 100 km
For electric models, consumption will be measured in kWh per 100 km. Consumption for diesel, LPG, CNG and electric vehicles will be converted to petrol equivalent using factors of 1.1168, 0.6857, 1.1563 and 0.1028 respectively. The notification defines petrol-equivalent fuel consumption as the declared tailpipe CO2 value divided by 23.7135.
Three-times weightage for electric vehicles
The notification allows manufacturers to use volume derogation factors, or super credits, for each model. The factors are:
- Battery electric vehicles and range-extended electric vehicles: 3.0
- Plug-in hybrid electric vehicles and strong hybrid electric vehicles (flex fuel ethanol): 2.5
- Strong hybrid electric vehicles: 1.6
- Flex fuel ethanol vehicles: 1.1
The effective volume of a model is its factor multiplied by the number of vehicles sold.
Carbon neutrality factors for biofuels
The Gazette also sets carbon neutrality factors that discount a model's declared tailpipe CO2. These are:
- 8 per cent for ethanol-blended petrol vehicles (E20 or higher blends), including strong and plug-in hybrids
- 22.3 per cent for flex fuel ethanol vehicles
- 5 per cent, or the CBG blending percentage notified by the Ministry of Petroleum and Natural Gas, whichever is higher, for CNG vehicles
- The actual biofuel blending percentage specified by the Ministry of Petroleum and Natural Gas for diesel vehicles
A manufacturer may claim 1.0 g CO2/km, equivalent to 0.0422 litre per 100 km, for each eligible technology deployed in a vehicle. The overall cap is 9.0 g CO2/km, equivalent to 0.3795 litre per 100 km.
The Gazette lists 12 eligible technologies:
- Start-stop system
- Tyre pressure monitoring system
- Regenerative braking system
- Transmission with six or more forward gears
- 12V/48V efficient alternator
- 12V/48V motor-generator (micro-hybrid)
- Exterior LED lighting
- Advanced glazing
- Electric water pump
- High-efficiency air-conditioning system
- Solar-reflective paint
- PWM-controlled radiator fan
MoRTH will separately develop certification methods for these technologies. For the first block period, savings claimed by manufacturers will be based on self-declaration. For the second block, claims must be supported by validated test results under methods specified by MoRTH. For the air-conditioning system and the solar-reflective paint, the Gazette says manufacturers will self-declare and the technologies will be benchmarked after the first block period.
Credits, debits and pooling
The difference between a manufacturer's actual fuel consumption and its standard will be converted into credits or debits. Credit is calculated as (T - P) x the total number of vehicles, and debit as (P - T) x the total number of vehicles. T is the applicable standard and P is the actual average, both in g CO2/km.
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Credits and debits will be recorded in a manufacturer-level passbook and can be carried forward within a compliance block. Credits left unsettled at the end of the block lapse. The first compliance block covers three years from 2027-28. The second covers two years from 2030-31.
Manufacturers may exchange or trade credits with one another on mutually agreed terms for compliance. The results of such trades must be furnished to the Designated Agency.
Buyout of credits from BEE
Manufacturers may also offset debit balances by buying credits from the BEE. The sums received will be governed by Rule 8 of the Energy Conservation (Compliance Enforcement) Rules, 2025. The price per g CO2/km is:
- 2027-28: ₹2,500
- 2028-29: ₹3,000
- 2029-30: ₹3,500
- 2030-31: ₹4,000
- 2031-32: ₹4,500
The Designated Agency will report the compiled data to the BEE on or before September 30 of each assessment year. Trading of credits and buyout from the BEE are allowed only in a 30-day window from October 1 to October 31. The Designated Agency must submit the final passbook to the BEE before November 30.
Compliance will be assessed every year, but any contravention will be assessed at the end of a compliance block, after credits are settled. It will be dealt with under Sections 26 to 28 of the Energy Conservation Act and will cover the manufacturer's entire sales in the block.
Non-compliance at the end of a block will be expressed in litres per 100 km. It is the total debit in g CO2/km divided by the product of total sales in the block and 23.7135.
Testing and data requirements
From April 1, 2027, manufacturers must declare CO2 performance for each model on both MIDC and the Worldwide Harmonized Light Vehicles Test Procedure (WLTP), both notified by MoRTH. Manufacturers must also submit state-wise sales data along with the final compliance report every year.
The conversion factor for moving the fuel economy targets from MIDC to WLTP will be notified separately by the Ministry of Power in consultation with the BEE. It will be based on the data reported to the BEE by the Designated Agency.
Exemption for small manufacturers
The Gazette defines a small volume manufacturer as one that makes or imports fewer than 1,000 eligible vehicles in a reporting period. Such manufacturers are exempt from meeting the specific target but must continue to report their annual average actual fuel consumption to the BEE.
