The government has put forth a more lenient set of Corporate Average Fuel Efficiency (CAFE) norms for the period of 2027–2032, aiming to ease the burden on the domestic auto sector. This revised approach, developed by the Ministry of Power in collaboration with the Bureau of Energy Efficiency (BEE), shifts away from strict targets to a phased tightening strategy. The proposal introduces a smoother compliance curve, reducing the advantage previously enjoyed by heavier vehicles.
Referred to as CAFE 2027, this draft marks the third phase of India’s fleet-level fuel economy roadmap, designed to align the automotive industry with the nation’s broader climate and energy objectives. The new norms are scheduled to come into effect from April 1, 2027, and will progressively become stricter through FY32, as per the report.
The updated framework signifies a significant relaxation compared to the earlier September 2025 draft. Notably, the emission curve has been adjusted with a new slope formula, starting at 0.00158 in FY28 and gradually easing to 0.00131 by FY32, allowing for slightly higher fuel consumption than previously envisioned. Furthermore, the draft incorporates super credits for electric and hybrid vehicles, enabling them to be counted as multiple units when calculating fleet-level emissions.
Manufacturers are now allowed to engage in credit trading, granting them added flexibility in meeting compliance requirements. While penalties for non-compliance could reach hundreds of crores of rupees for major manufacturers, the EV and hybrid credit system emerges as a crucial financial tool for the industry. Moreover, small-volume players, including niche manufacturers producing fewer than 1,000 units annually, have been exempted from compliance obligations, providing them with some respite.
