Written by PPL Newsroom• October 4, 2026• 5:26 am• Policy

India notifies CAFE-III fuel norms for cars, keeping a 3x credit for battery EVs

The Ministry of Power’s rules, effective April 2027, tighten fleet fuel-consumption targets by 16.7% by 2032 but give small cars no separate concession.

The Ministry of Power notified the third phase of Corporate Average Fuel Economy (CAFE-III) norms on 30 September 2026. They take effect on 1 April 2027 and remain in force through 31 March 2032. The rules set how much fuel each carmaker’s passenger-vehicle fleet may burn on average, and they shape how firms balance petrol cars, hybrids and electric vehicles (EVs).

The targets in plain terms

According to PTI, the norms aim for a 16.7 per cent improvement in fleet-average fuel consumption over five years. The benchmark moves from 3.996 litres per 100 km in 2027-28 to 3.3273 litres per 100 km in 2031-32. In everyday terms, the average new car in a maker’s portfolio must use noticeably less fuel to cover the same distance by the end of the period.

Compliance is in a three-year block from fiscal 2027-28, followed by a two-year block from fiscal 2030-31. Credits left unsettled at the end of a block will lapse. Hyundai Motor India called the final notification “a positive step by the Government towards advancing sustainable mobility in India”, and said the block structure gives firms predictability for planning.

Small cars, SUVs, EVs and hybrids

Small cars: A September 2025 draft proposed deducting 3 g/km of CO2 for petrol cars weighing up to 909 kg. Tata Motors and Mahindra & Mahindra objected, saying it would favour only Maruti Suzuki. The final text drops that concession. However, the weight-adjustment formula was revised to give lighter vehicles relatively favourable targets.

Heavier vehicles: The reference vehicle weight has risen to 1,229 kg from 1,170 kg, easing targets for lighter fleets and tightening them for heavier ones. A 909-kg car now has an FY28 target of about 82.8 g CO2/km, against about 76 g in the draft. SUV-heavy makers therefore face tougher arithmetic.

EVs and hybrids: The notification sets these multipliers for the fleet average:

Battery and range-extended EVs: 3.0
Plug-in hybrids and flex-fuel strong hybrids: 2.5
Strong hybrids: 1.6
Flex-fuel ethanol vehicles: 1.1

In practice, a battery EV counts as three vehicles when a carmaker’s fleet average is calculated.

Other flexibilities

The rules expand recognised fuel-saving technologies from four to 12, each worth 1 g/km, up to a maximum of 9 g/km. A Carbon Neutrality Factor also rewards cleaner fuels: 8 per cent for E20-and-above petrol vehicles including specified hybrids, and 22.3 per cent for flex-fuel ethanol vehicles. CNG vehicles get 5 per cent or the notified CBG-blending percentage, whichever is higher. Credit trading between manufacturers is also allowed, according to Auto Punditz.

From April 2027, manufacturers must report performance under both the Modified Indian Driving Cycle and the WLTP test procedure, a step towards globally harmonised testing.

What this means for India

These rules cover cars sold in India, so they affect what makers build and price over the next five years. The 3x EV credit and 1.6x strong-hybrid credit reward electrification, while the ethanol and CNG factors link car regulation to the country’s biofuel blending. Buyers’ choices stay the same for now, since the norms bind manufacturers. CarWale notes the notification itself does not propose price changes. The test to watch is whether makers meet the tightening targets with more efficient vehicles, not just credit multipliers.

What happens next

The notification ended 27 months of drafts and disputes among carmakers, with the Bureau of Energy Efficiency’s first draft appearing in June 2024. Manufacturers now have until April 2027 to align their product plans, or start racking up debits.