Context:

• India’s transition towards clean mobility has entered a decisive phase with two major policy developments.
• The draft Delhi EV Policy 2.0 released for public consultation, and the revised draft of CAFE-3 (Corporate Average Fuel Efficiency) norms circulated by the Bureau of Energy Efficiency (BEE).
• Together, these measures could determine whether India moves from gradual EV adoption to a large-scale transformation in transport decarbonisation.

Delhi EV Policy 2.0 - A Shift from Incentives to Regulation:

• Delhi as a pioneer in urban mobility reform:
  • Delhi has historically acted as a laboratory for urban transport reforms with initiatives like early adoption of metro rail, modernisation of public bus systems, and the launch of the landmark Delhi EV Policy 2020.
  • The new draft policy builds on this legacy and marks a major policy shift.
• Key features of Delhi EV Policy 2.0:
  • Phase-out of internal combustion engine (ICE) vehicles:
    • The most significant proposal is the phased ban on new registrations of ICE vehicles in key segments -
      • ICE three-wheelers: No new registrations from January 2027
      • ICE two-wheelers: No new registrations from April 2027
    • Since two- and three-wheelers constitute nearly 75% of Delhi’s vehicle sales, this is a transformational intervention.
  • Clear regulatory direction:
    • Unlike earlier approaches centred mainly on subsidies, the policy provides long-term regulatory certainty, predictable transition timelines, and clear signals to manufacturers and investors.
    • This encourages manufacturing investments, supply-chain development, and innovation in EV technology.
• Significance of the policy - Moving beyond subsidy-driven adoption:
  • India’s EV growth has largely depended on incentives such as purchase subsidies, tax benefits, and state incentives. However, subsidies alone cannot achieve scale.
  • Global experience shows that rapid EV adoption occurs when incentives are combined with mandatory targets, ICE phase-out timelines, and strong regulatory signals.
  • Delhi’s policy represents India’s shift toward this model.

Revised CAFE-3 Norms:

• What are CAFE norms?
  • Corporate Average Fuel Efficiency (CAFE) norms regulate average fuel efficiency and emissions standards for automobile manufacturers.
  • They are India’s principal regulatory tool for improving fuel economy and reducing transport emissions in the passenger vehicle segment.
• Why CAFE-3 matters?
  • Passenger vehicles remain a weak link in India’s EV transition, for example, EV penetration in passenger cars is only around 4%.
  • Hence, stricter efficiency standards are essential for accelerating electrification.
• Positive changes in the revised draft:
  • Reduced bias towards small petrol vehicles: Earlier provisions that disproportionately favoured small petrol vehicles have been tightened.
  • Flexible compliance mechanisms:
    • The draft introduces credit pooling, and purchase of compliance credits.
    • These mechanisms ease industry transition, maintain pressure for higher efficiency standards, and promote regulatory accountability.

Broader Strategic Importance:

• Energy security dimension: India imports nearly 90% of its crude oil requirements, making transport electrification strategically important.
• EV transition can help:
  • Reduce oil import dependence
  • Improve energy security
  • Lower current account pressure
  • Reduce urban pollution
  • Achieve climate commitments

Key Concerns Regarding Revised CAFE-3 Norms:

• Super-credit multipliers for hybrid technologies:
  • The draft continues to provide generous compliance credits for strong hybrids, plug-in hybrids, and flex-fuel vehicles.
  • Why this is problematic: These are not truly zero-emission technologies. Over-incentivising hybrids may delay full electrification, lock India into intermediate technologies, and slow long-term decarbonisation goals.
• Policy paralysis:
  • CAFE-3 has remained under discussion for more than three years, despite multiple consultations and draft revisions.
  • Impacts of delay - manufacturers postpone investments, supply chains evolve slowly, market uncertainty persists, etc.
  • Hence, finalising CAFE-3 is now a matter of urgency rather than refinement.

Freight Transport - The Missing Piece in India’s Decarbonisation Strategy:

• Emission imbalance in freight sector:
  • Trucks constitute only 3% of India’s vehicle fleet, yet contribute around 44% of transport emissions.
  • This makes freight transport one of the most critical sectors for decarbonisation.
• Weaknesses in current framework:
  • India’s heavy-duty vehicle regulations currently rely on model-specific fuel efficiency standards.
  • However, they lack fleet-average efficiency mechanisms, strong incentives for zero-emission trucks, and systemic regulatory pressure.
  • As a result, investment in electric trucks remains weak, and hydrogen-based freight mobility progresses slowly.

Suggested Reforms for Freight Sector - CAFE Like Norms for Commercial Vehicles:

• Proposed features:
  • Fleet-average fuel efficiency standards
  • Differentiation based on payload categories
  • Incentives for zero-emission trucks
  • Strong regulatory push for electrification
• Without such reforms, schemes like the e-Truck initiative of the Ministry of Heavy Industries may struggle to scale.

Way Forward:

• India should “technologically pole vault”: Directly into zero-emission mobility, similar to its leap in digital public infrastructure, and mobile telephony adoption.
• Develop freight decarbonisation framework: Introduce fleet-average standards for trucks. Incentivise electric and hydrogen freight vehicles.
• Prioritise full electrification: Reduce excessive incentives for hybrids. Focus on zero-emission mobility.
• Improve institutional capacity of BEE: The Bureau of Energy Efficiency (BEE) must act more decisively as a regulator rather than merely a consultative body.
• Integrate EV transition with renewable energy: India already possesses expanding renewable energy capacity, large domestic market and manufacturing potential. These strengths should be leveraged for clean mobility leadership.

Conclusion:

• India stands at a crucial inflection point in its clean mobility transition. Delhi EV Policy 2.0 and the proposed CAFE-3 norms together provide an opportunity to shift from incremental progress to systemic transformation.
• While the policy direction is encouraging, delays, regulatory ambiguity, and overreliance on transitional technologies could weaken momentum.
• A decisive push towards full electrification is essential not only for climate goals but also for energy security, industrial competitiveness, and sustainable urban development.
• India now needs bold execution to match its clean mobility ambitions.