The Ministry of Energy has released the Corporate Average Fuel Economy (CAFE)-III plan, calling for stricter regulations for passenger vehicles starting April 1, 2027. The draft is open for public comment and will replace the existing CAFE-II provisions, which are expected to be in effect until March 31, 2027.The rules will apply to the M1 passenger car category manufactured or imported in India between FY2027-28 and FY2031-32. This category includes passenger cars with eight seats, excluding the driver’s seat. Stakeholders can send their views and comments to the Ministry of Energy until August 6, 2026.One of the major changes under the CAFE-III plan is the gradual tightening of fuel targets over five years. The document seeks to reduce the target from 3.996 liters per 100 km (94.76 gCO₂/km) in FY2027-28 to 3.3273 liters per 100 km (78.90 gCO₂/km) by FY2031-32. According to the government, this step-by-step process aims to give carmakers a clear path to developing and introducing fuel-efficient models.Compliance with the new regulations will be assessed in two phases. The next phase will cover the first three-year period, followed by the second two-year period. The government believes that the system will allow OEMs to gradually adapt to the strict requirements.This arrangement also provides recognition of the neutrality of other types of oil for the first time. If used, ethanol, bio-fuels and compressed bio-gas (CBG) will receive a declared reduction in tailpipe carbon dioxide emissions. For the latest ethanol blends, an 8 percent Carbon Neutrality Factor (CNF) has been proposed, while reductions in CBG and other vegetable oils will depend on existing levels.Another important step is to promote fuel-saving technologies. Manufacturers will be allowed to claim benefits of up to 9 gCO₂/km for approved technologies, although benefits will be limited to 1 gCO₂/km for the technology.
