CAFE-III: India’s Corporate Average Fuel Efficiency Norms

Every car a company sells in India counts toward one shared average, not its own score. This article covers India’s fuel-efficiency rules for passenger vehicles, and the tougher new norms now being drafted for 2027.

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CAFE-III

India’s fuel-efficiency rules for cars are tightening again, with a new twist for biofuels and EVs.

2017

CAFE-I Begins

India’s first fleet-wide fuel-efficiency rule, targeting 130 g CO2/km.

2022

CAFE-II Tightens

Target cut to 113 g CO2/km, effective that April.

16 JUL 2026

CAFE-III Draft Circulated

Stakeholder feedback invited, due by 6 August 2026.

1 APR 2027

CAFE-III Takes Effect

Replaces CAFE-II, runs five years, through 2031-32.

What’s new: CAFE-III proposes India’s first carbon-neutrality credit for ethanol and biofuel blends, plus a triple-counting boost for electric vehicles.

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Timeline

• 2017: CAFE-I begins, India’s first fleet-wide fuel-efficiency rule, targeting 130 g CO2/km.
• April 2022: CAFE-II takes effect, tightening the target to 113 g CO2/km.
• 16 July 2026: The Ministry of Power circulates draft CAFE-III norms for stakeholder consultation.
• 1 April 2027: CAFE-III is set to take effect, replacing CAFE-II for the next five years.

Must Know

• CAFE stands for Corporate Average Fuel Efficiency. It sets one average fuel-economy and CO2 target, across a manufacturer’s entire fleet sold each year. It does not score individual car models.
• The Bureau of Energy Efficiency (BEE), under the Ministry of Power, administers CAFE norms. It works under the Energy Conservation Act.
• CAFE norms apply to M1 category passenger vehicles — those with a gross vehicle weight under 3.5 tonnes.
• CAFE-I ran from 2017, targeting a fleet average of 130 g CO2/km.
• CAFE-II has run since April 2022, tightening that target to 113 g CO2/km.

Good to Know

• On 16 July 2026, the Ministry of Power circulated draft CAFE-III norms for stakeholder consultation. Feedback was due by 6 August 2026.
• CAFE-III is set to apply from 1 April 2027 through 2031-32, replacing CAFE-II.
• Its fuel-consumption targets tighten yearly: from 3.996 litres per 100 km in 2027-28, to 3.3273 litres per 100 km by 2031-32.
• Manufacturers selling fewer than 1,000 vehicles a year are exempt from CAFE norms.

Test Yourself

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1. What does CAFE stand for, in India’s vehicle fuel-efficiency rules?

Corporate Average Fuel Efficiency

Central Automobile Fuel Emission

Clean Automotive Fuel Economy

Combined Annual Fleet Efficiency

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Great to Know

• For the first time, CAFE-III proposes Carbon Neutrality Factors (CNFs). These give partial CO2 credit for ethanol and biofuel blends. E20-E30 petrol gets an 8% discount, flex-fuel ethanol vehicles get 22.3%, and CNG vehicles get 5%.
• Battery electric vehicles and range-extended EVs count as three vehicles each, for compliance purposes. This incentive is built directly into the maths, not just offered as a separate subsidy. See IndEco0119 — Electric Vehicles in India for the wider EV policy picture.
• Manufacturers who miss their target must buy compliance credits. These are priced at ₹2,500 per gram of CO2/km initially, rising by ₹500 every year. This turns non-compliance into an escalating cost, not a flat one-time fine.
• CAFE-III’s biofuel credits also connect to India’s ethanol-blending push. See IndEco0151 — Ethanol Blended Petrol (EBP) Programme in India for that side of the story.