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. Tougher new rules for that average were notified on 30 September 2026, starting in 2027.

CAFE

Corporate Average Fuel Efficiency; full name spelled out in the title above.

BEE

The Bureau of Energy Efficiency, which administers CAFE norms for India.

CNF

Carbon Neutrality Factor, CAFE-III’s new partial CO2 credit for ethanol and biofuel blends.

Average, Not Per-Car

• CAFE stands for Corporate Average Fuel Efficiency.
• It sets one average fuel-economy and CO2 target. That target applies across a manufacturer’s entire fleet sold each year.
• CAFE does not score individual car models. A highly efficient small car can offset a less efficient large one, within the same company’s fleet.
• The Bureau of Energy Efficiency, or BEE, administers CAFE norms. BEE sits under the Ministry of Power, and works under the Energy Conservation Act.
• CAFE norms apply to M1 category passenger vehicles. That means vehicles with a gross vehicle weight under 3.5 tonnes.

Three Generations of CAFE

• CAFE-I began in 2017. It was India’s first fleet-wide fuel-efficiency rule, targeting 130 g CO2/km.
• CAFE-II took effect in April 2022. It tightened that target to 113 g CO2/km.
• On 16 July 2026, the Ministry of Power circulated draft CAFE-III norms for stakeholder consultation.
• CAFE-III is set to take effect on 1 April 2027. It will replace CAFE-II for the next five years.

What CAFE-III Changes

• The Ministry of Power circulated draft CAFE-III norms on 16 July 2026. Feedback on the draft 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 every year. They go from 3.996 litres per 100 km in 2027-28, down to 3.3273 litres per 100 km by 2031-32.
• Manufacturers selling fewer than 1,000 vehicles a year are exempt from CAFE norms.
• Other major markets run their own fleet-average rules too, including the United States and the European Union. Each sets its own specific targets and measurement method. India’s own norms aren’t identical to either one.

What changed when the final CAFE norms were notified on 30 September 2026?

• 30 September 2026: The Ministry of Power notified the final CAFE norms. The draft had come out in July. (Source: PIB)
• The norms cover new passenger vehicles from 1 April 2027 to 31 March 2032. (Source: PIB)
• The fuel benchmark tightens from 3.996 to 3.3273 litres per 100 km. That is about 16.7% better. (Source: PIB)
• Recognised fuel-saving technologies rise from four to twelve. (Source: PIB)
• Test results will be reported under both MIDC and WLTP. These are two different test cycles. (Source: PIB)
• A Carbon Neutrality Factor gives credit for ethanol blends, biofuels and CBG. (Source: PIB)
• EVs, hybrids and flex-fuel cars earn super credits. Makers selling under 1,000 cars a year stay exempt. (Source: PIB)
• Read more: Electric Vehicles in India and Ethanol Blended Petrol (EBP) Programme in India.

Carbon Credits and Penalties

• For the first time, CAFE-III proposes Carbon Neutrality Factors, or CNFs. These give partial CO2 credit for ethanol and biofuel blends.
• E20-E30 petrol gets an 8% discount under this system. Flex-fuel ethanol vehicles get 22.3%. CNG vehicles get 5%.
• Battery electric vehicles, and range-extended EVs, count as three vehicles each. This is only for compliance purposes. This incentive sits directly inside the maths, not as a separate subsidy.
• The multiplier exists because EVs have zero tailpipe CO2 emissions. Counting them heavily pulls a manufacturer’s fleet average down fast. That gives a strong incentive to sell more EVs, relative to petrol and diesel models.
• Manufacturers who miss their target must buy compliance credits. These start at ₹2,500 per gram of CO2/km, and rise by ₹500 every year.
• This turns non-compliance into an escalating cost. It’s not a flat, one-time fine.
• CAFE-III’s biofuel credits connect to a wider push too. That’s India’s own ethanol-blending programme. See IndEco0151 — Ethanol Blended Petrol (EBP) Programme in India for that side of the story.

Fleet Average, Not a Single-Car Rule

• Don’t confuse CAFE norms with a per-model or per-vehicle emissions standard. Bharat Stage, or BS, rules work that way instead, covering fuel quality and tailpipe emissions.
• CAFE applies to a manufacturer’s whole annual sales fleet, averaged together. A highly efficient small car can offset a less efficient large one this way.
• A separate trap swaps CAFE’s regulator with another body. The Bureau of Energy Efficiency administers CAFE norms. It sits under the Ministry of Power.
• It’s not the Ministry of Road Transport and Highways that runs CAFE. That ministry instead handles vehicle safety, and BS emission standards.
• Questions on Bharat Stage emission norms belong to a dedicated BS-emission-standards topic instead. Questions on fleet-average fuel targets belong here.