The Indian government is considering delaying the implementation of the third phase of Corporate Average Fuel Efficiency (CAFE-III) norms, which are currently scheduled to come into effect from April 1, 2027, according to a report by The Times of India.
The development follows sustained lobbying by sections of the automobile industry, which has argued that the proposed targets are too steep and the timeline insufficient for adequate compliance. No official deferral has been announced, but the possibility is being discussed within government circles as the notification deadline draws near without a settled framework in place.
- Proposed fleet emission target of 88.4g/km CO2 in 2027
- Gradually reducing to 71.5 CO2g per km by 2032
- Industry divided over testing cycles, small-car exemptions and EV credits
What CAFE norms regulate
Fleet-wide CO2 limits for carmakers
Corporate Average Fuel Efficiency norms require each passenger vehicle manufacturer to ensure that the sales-weighted average CO2 emissions of its entire model lineup remain within a prescribed limit.
Unlike vehicle-specific emission standards, the fleet-wide averaging mechanism means a company can offset a less efficient model with a cleaner one, making overall portfolio composition central to compliance planning. India introduced its first CAFE norms in 2017, followed by stricter CAFE-II standards in 2022.
The proposed CAFE-III framework aims to cap fleet emissions at 88.4g/km by 2027, tightening further to 71.5g/km by 2032. The Bureau of Energy Efficiency, contends that stricter caps are warranted, as major Indian automakers have already exceeded CAFE-II targets ahead of schedule — a point that regulators use to argue the industry has greater capacity to comply than it acknowledges publicly.
Industry disagreement over targets and exemptions
Small-car exemption and test cycles debated
Automakers have raised concerns over the proposed emission targets and the shift toward WLTP-based testing, which is considered closer to real-world driving conditions but more stringent than India’s existing MIDC cycle.
The draft framework has also triggered debate over weight-based exemptions for smaller cars. An earlier draft released in September suggested leniency for petrol cars weighing 909kg or less, a move widely viewed as favouring manufacturers with strong small-car portfolios such as Maruti Suzuki.
This exemption was later removed, increasing pressure on automakers to rely more heavily on electric and hybrid vehicles to meet compliance targets.
Electric vehicle credits and compliance tools
Super-credit system under scrutiny
The proposed framework includes super credits for electric and hybrid vehicles, allowing them to count as multiple vehicles when calculating fleet emissions. Under the draft rules, each electric vehicle sold would count as three vehicles for compliance, while plug-in hybrids and flex-fuel hybrids would receive multipliers of 2.0 to 2.5.
Industry groups have argued for higher multipliers, saying this would make compliance easier. However, environmental organisations warn that excessive credits could weaken the effectiveness of emission regulations.
To ease the transition, the rules allow up to three automakers to form a compliance pool, treating them as a single entity for the purposes of calculating fleet-wide averages. Penalties for non-compliance could run into hundreds of crores of rupees for large manufacturers, depending on the scale of exceedance per vehicle sold.
Regulatory uncertainty ahead of 2027 deadline
Government seeking industry consensus
Union Power Minister Manohar Lal has said the government will take a consensual approach before finalising the rules, signalling that industry alignment will play a key role in the decision.
However, divisions remain within the industry. At a SIAM CEOs Council meeting, 15 out of 19 automakers voted against a proposed weight-based exemption for small cars, with only Maruti Suzuki and Renault supporting the measure, preventing the industry body from presenting a unified position to the government.
With the April 2027 deadline approaching, analysts say the government may either delay the rollout, revise the targets, or proceed with the current draft, depending on the outcome of ongoing conversations.
The broader regulatory stakes extend beyond individual company strategies. The proposed fuel-efficiency rules could influence prices, safety, model strategy, and the pace of electrification in the years ahead.