The Indian government has proposed stricter fuel efficiency regulations for passenger vehicles under the Corporate Average Fuel Efficiency (CAFE)-III norms, with the new fuel standards set to take effect on April 1, 2027. Released by the Ministry of Power for public consultation, these rules aim to lower vehicular emissions, decrease reliance on imported crude oil, and shrink the nation’s rising oil import bill.
To capture real-world emissions accurately, the framework will transition from the Modified Indian Driving Cycle (MIDC) to the more comprehensive World Light Duty Vehicle Testing Procedure (WLTP). Under the new rules, M1 category passenger vehicles (weighing up to 3,500 kg, including hatchbacks, sedans, and SUVs) are expected to cut their fuel consumption from 3.996 liters/100 km in 2027–28 to 3.327 liters/100 km by 2031–32. CAFE-3 emission rules will tighten carbon targets from 113 g/km to 76 g/km by 2032, with non-compliance attracting severe penalties ranging from ?2,500 to ?4,500 per gram of excess CO?/km.
Car manufacturers that outperform their fleet-wide targets will earn compliance credits, which they can sell via a market trading system to manufacturers that fall short of the efficiency baseline, avoiding hefty government penalties. Additionally, for the first time, the policy gives regulatory benefits to cars powered by alternative fuels. Automakers selling flex-fuel, ethanol-powered or biofuel vehicles will get a more favorable emission value calculation, rewarding lower lifecycle carbon emissions. This complements the government’s simultaneous push for 100% ethanol (E100) vehicles.
Other than lower emissions and lower fuel bills, car buyers are likely to benefit from a broader market selection of hybrids, electric vehicles (EVs) and alternative fuel models. Automakers are planning to launch over 15 new EV models, bringing the total market options to well over 35. Meanwhile, brands like MG are introducing innovative plug-in hybrids (PHEVs) built on new multi-energy platforms to give buyers long-range convenience alongside low running costs. On the downside, more stringent technology mandates are expected to increase vehicle manufacturing costs, potentially driving up upfront sticker prices.
By Alex Kimani for Oilprice.com
