Why in News?

• India has released draft Corporate Average Fuel Efficiency (CAFE) 3 norms through the Bureau of Energy Efficiency (BEE).
• These norms aim to tighten fuel efficiency and emission standards while addressing industry demands for flexibility, especially for small cars and electric vehicles (EVs).

What’s in Today’s Article?

• Current CAFE Framework in India
• Key Features of Proposed CAFE 3 Norms
• Conclusion

Current CAFE Framework in India:

• CAFE:
  • Introduced in 2017 by BEE, Ministry of Power, to regulate fuel consumption and carbon emissions from passenger vehicles.
  • These norms apply to vehicles running on petrol, diesel, liquefied petroleum gas (LPG), compressed natural gas (CNG), hybrids, and electric vehicles (EVs) weighing less than 3,500 kg.
  • Designed to reduce oil dependency and curb air pollution, pushing automakers to lower carbon dioxide emissions while incentivising the production of EVs, hybrids, and CNG vehicles.
• CAFE 2: In 2022-23, the norms were tightened (fuel consumption capped at 4.78 litres/100 km, and CO₂ emissions capped at 113 g/km) with increased penalties for non-compliance.
• Need for CAFE 3:
  • In the USA, EU, China, Japan, smaller lightweight cars receive relaxed CO₂ norms.
  • However, India’s current framework is inverted, giving SUVs more relaxed limits and burdening small cars.
  • So, CAFE 3 seeks to align with global best practices.

Key Features of Proposed CAFE 3 Norms:

• Applicability:
  • Covers M1 category passenger vehicles with a seating capacity of 9 people (including the driver) and a maximum weight of 3,500 kilogram.
  • Non-compliance will attract penalties under the Energy Conservation Act, 2001.
• Efficiency targets:
  • Under CAFE 3, the efficiency formula is: [0.002 x (W – 1170) + c]. It is measured in petrol-equivalent litres per 100 kilometre.
  • Here, W is the average fleet weight, 1,170kg is the fixed constant for weight, 0.002 is a fixed constant multiplier, and ‘c’ is a constant that changes every year.
  • Since ‘c’ continues to decrease from FY28 to FY32, the rules will become stricter over time. This constant starts at 3.7264 in FY28, then subsequently drops to 3.0139 in FY32.
  • Lighter vehicles have easier compliance compared to heavier SUVs or premium cars.
• Incentives for small cars:
  • Additional relaxation of 3.0 g CO₂/km (capped at 9.0 g/km) for compact petrol cars (unladen mass up to 909 kg, engine capacity not exceeding 1200 cc and length not exceeding 4000 mm).
  • This is designed to revive the small car segment, which saw a 71% sales decline in six years.
  • Complementary policy: GST 2.0 reforms lowered GST on small cars from 28% to 18%.
• Boost for EVs and alternate fuels:
  • Super credits multipliers:
    • Companies could potentially obtain relaxation in their overall efficiency target as the norms propose to offer companies “super credits” based on the type of vehicle they sell.
    • Each EV sold will be counted three times while calculating a company’s average.
    • Plug-in hybrids will be counted 2.5 times, and strong hybrids twice.
    • Flex-fuel ethanol cars are given a smaller multiplier of 1.5.
  • Carbon Neutrality Factor (CNF) introduced:
    • CNF offers further relaxation on the targets based on the type of fuel used in a car.
    • For example, for petrol vehicles (E20 to E30) 8% CNF on tailpipe CO2; for flex fuel ethanol vehicles and strong hybrid electric vehicles 22.3% CNF on tailpipe CO2; etc.
• Emissions pooling:
  • Up to three carmakers can form a pool (to meet the targets jointly) and be treated as a single manufacturer.
  • Pool manager legally responsible for compliance and penalties.
  • Reduces compliance costs and encourages strategic alliances.

Conclusion:

• The proposed CAFE 3 norms mark a critical shift in India’s emission strategy—reviving small cars, incentivising EVs, and tightening long-term efficiency goals.
• If implemented effectively, they could reduce India’s oil import dependency, accelerate green mobility adoption, and align India’s policies with global climate commitments under the Paris Agreement.
• However, challenges remain in industry adaptation, consumer acceptance, and infrastructure readiness for alternative fuel vehicles.