New CAFE Norms for Passenger Vehicles Notified; To Take Effect from April 2027

The Ministry of Power has notified new Corporate Average Fuel Economy (CAFE) Norms for passenger vehicles, which will come into effect from 1 April 2027 and remain applicable until 31 March 2032. The norms will replace the existing CAFE framework and apply to new passenger vehicles manufactured or imported for sale in India. 

Fuel-Consumption Benchmark to Tighten by 16.7%

Under the new framework, the fuel-consumption benchmark will be progressively tightened each year. It will move from 3.996 litres per 100 km in 2027-28 to 3.3273 litres per 100 km in 2031–32, representing an improvement of approximately 16.7% over the five-year period. 

The revised target line will also adopt a more weight-sensitive approach, with relatively softer targets for lighter vehicles and higher fuel-efficiency requirements for heavier vehicles. The reference weight has been increased from 1,082 kg to 1,229 kg, an increase of around 13.6%. 

Alternative Fuels and Cleaner Technologies

The framework provides manufacturers with flexibility to adopt alternative fuels, cleaner technologies and other solutions for meeting CAFE obligations. It recognises renewable and low-carbon fuels, including ethanol-blended petrol, biofuels and compressed biogas (CBG), through the introduction of a Carbon Neutrality Factor (CNF). 

The framework also recognises technologies such as solar reflective paints, advanced glazing and high-efficiency air-conditioning for improving fuel efficiency. 

Super Credits for Electric, Hybrid and Flex-Fuel Vehicles

Battery Electric Vehicles (BEVs), Range-Extended Electric Vehicles (REEVs), Plug-in Hybrid Electric Vehicles (PHEVs), Strong Hybrid Electric Vehicles (SHEVs) and Flex-Fuel Vehicles will receive volume derogation factors, also known as “super credits”, in fleet-average calculations. 

The list of recognised fuel-conservation technologies has also been expanded from four to twelve technologies. A concession of 1 g CO₂/km per eligible technology, subject to a maximum of 9.0 g CO₂/km, is available under the framework. 

Credit Trading and Compliance Flexibility

Manufacturers may meet their obligations over specified two-year or three-year compliance blocks. Manufacturers exceeding their prescribed targets can generate credits that may be carried forward within the specified compliance blocks. 

Manufacturers facing a compliance gap may use eligible carry-forward provisions, exchange or trade credits with other manufacturers, or purchase credits through the buyout mechanism administered by the Bureau of Energy Efficiency. 

Dual Testing and Exemption for Low-Volume Manufacturers

Reporting under the new framework will be undertaken under both the Modified Indian Driving Cycle (MIDC) and the Worldwide Harmonized Light Vehicles Test Procedure (WLTP). 

Manufacturers with annual sales of below 1,000 units will remain exempt from fleet-average obligations.