New Delhi: The Ministry of Power, Government of India, has notified the new Corporate Average Fuel Economy (CAFE) Norms for passenger vehicles, which will come into effect from April 1, 2027, and remain applicable until March 31, 2032.
The new Corporate Average Fuel Economy framework will apply to new passenger vehicles manufactured or imported for sale in India.
The new Corporate Average Fuel Economy framework will drive progressive improvements in fuel economy through year-on-year tightening of targets across all five years.
The fuel-consumption benchmark will be tightened from 3.996 litres/100 km in 2027–28 to 3.3273 litres/100 km in 2031–32, representing an improvement of around 16.7% over the period.
The revised target line has also been flattened to provide a more balanced, weight-sensitive approach, with relatively softer targets for lighter vehicles and greater fuel efficiency requirements for heavier vehicles.
Under the new Corporate Average Fuel Economy norms, the reference weight has been increased from 1,082 kg under the existing norms to 1,229 kg, an increase of around 13.6%.
The change reflects the evolving characteristics of India’s passenger vehicle fleet. The new norms provide flexibility to manufacturers to adopt cleaner technologies, alternative fuels and other innovative solutions.
The Corporate Average Fuel Economy framework promotes technological innovation through technologies such as solar reflective paints, advanced glazing and high-efficiency air-conditioning to improve fuel efficiency and support India’s energy security and sustainability objectives.
The passenger vehicle segment accounts for a substantial share of India’s transport energy demand and remains an important contributor to fossil-fuel consumption.
The new Corporate Average Fuel Economy framework is consistent with and supports rapid technological advancements, increasing availability of alternative and renewable fuels, growing electrification and evolving global automotive technologies.
Corporate Average Fuel Economy Norms: 2027-28 to 2031-32
The new Corporate Average Fuel Economy Norms will apply to passenger vehicles from April 1, 2027, to March 31, 2032.
They will replace the existing CAFE norms with effect from April 1, 2027, and apply to new passenger vehicles manufactured or imported for sale in India.
The new framework provides greater regulatory clarity and a stable policy framework for the automobile industry while facilitating technological innovation and supporting the continued evolution of India’s passenger vehicle sector towards greater energy efficiency and lower fuel consumption.
The Corporate Average Fuel Economy framework marks an important milestone in India’s transition towards cleaner, more energy-efficient and sustainable mobility.
The new norms have been finalised following extensive consultations with automobile manufacturers, industry associations, academia and other stakeholders.
The objective is to provide a future-ready, technology-neutral and flexible regulatory framework for the passenger vehicle sector.
The framework builds on the gains achieved under the existing regime while providing greater technology choice, flexibility and regulatory certainty to the automotive industry.
The Corporate Average Fuel Economy framework seeks to drive continuous improvements in fuel efficiency while enabling greater adoption of cleaner technologies, alternative fuels and innovative solutions. It also supports India’s energy security and sustainability objectives.
The framework is aligned with the broader vision articulated by Prime Minister Narendra Modi for clean, energy-efficient and sustainable mobility as an important pillar of India’s development and energy security.
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Key Features of the New CAFE Norms
- Stronger Fleet-Average Targets
The overall fleet-average target under the new Corporate Average Fuel Economy framework has been progressively strengthened compared with the existing targets.
At the same time, manufacturers will have access to a range of incentives and compliance pathways to encourage the adoption of clean fuels, cleaner technologies and more efficient vehicles.
The framework therefore combines higher ambition with greater flexibility for industry to determine the most appropriate technology pathways.
- Carbon Neutrality Factor for Cleaner Fuels
The Corporate Average Fuel Economy framework recognises the contribution of renewable and low-carbon fuels, including ethanol-blended petrol, biofuels and compressed biogas (CBG), through the introduction of the Carbon Neutrality Factor (CNF).
This provides manufacturers with an additional pathway for improving their fleet-level CAFE performance alongside vehicle efficiency improvements and electrification.
The provision supports India’s broader transition towards cleaner fuels while encouraging innovation across multiple technology pathways.
- More Fuel-Conservation Technologies Recognised
The list of recognised fuel-conservation technologies has been significantly expanded from four to 12 technologies under the new Corporate Average Fuel Economy norms.
This provides manufacturers with greater flexibility to adopt and receive recognition for approved fuel-saving technologies.
A concession of 1 g CO₂/km for each eligible technology, subject to a maximum of 9.0 g CO₂/km, is available under the framework.
- Super Credits for Cleaner Vehicle Technologies
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.
Under the Corporate Average Fuel Economy framework, this provides an additional incentive for manufacturers to accelerate the deployment and market penetration of cleaner and advanced vehicle technologies.
- Two-Year and Three-Year Compliance Blocks
To facilitate ease of compliance and provide manufacturers with greater operational flexibility, manufacturers may opt to meet their obligations over specified two-year and three-year compliance blocks, as provided under the framework.
This provision gives manufacturers greater flexibility in managing their technology transition and product portfolios over the compliance period.
- Greater Flexibility Through CAFE Credits
The Corporate Average Fuel Economy framework provides greater flexibility to manufacturers in meeting their CAFE obligations.
Manufacturers that perform better than their prescribed targets will generate credits, which may be carried forward within the specified compliance blocks.
Manufacturers with a compliance gap may utilise eligible carry-forward provisions, enter into exchange or trade of credits with other manufacturers, or purchase credits through the buyout mechanism administered by the Bureau of Energy Efficiency (BEE).
These provisions are intended to ease the compliance burden, provide flexibility during the transition and enable manufacturers to manage variations in their product portfolio and technology adoption pathways.
- MIDC and WLTP Reporting
Reporting under the new Corporate Average Fuel Economy framework will be undertaken under both the Modified Indian Driving Cycle (MIDC) and the Worldwide Harmonized Light Vehicles Test Procedure (WLTP).
This dual approach will facilitate India’s gradual transition towards globally harmonised vehicle testing practices.
- Exemption for Low-Volume Manufacturers
Manufacturers with annual sales of below 1,000 units will remain exempt from fleet-average obligations under the new Corporate Average Fuel Economy norms.
The provision is intended to avoid the regulatory burden for low-volume manufacturers.
