WHAT?

The Corporate Average Fuel Efficiency (CAFE) III Norms are the upcoming phase of India’s fuel efficiency regulations, set to take effect from April 1, 2027, aimed at reducing carbon dioxide (CO₂) emissions and improving fuel economy across passenger vehicles.

These norms, administered by the Bureau of Energy Efficiency (BEE) under the Energy Conservation Act, 2001, apply to vehicles weighing less than 3,500 kg, including those powered by petrol, diesel, LPG, CNG, hybrids, and electric powertrains.

Key Features of CAFE III Norms

1. Emission Targets:
   • CAFE III: Caps fleet-wide CO₂ emissions at 91.7 g/km for passenger vehicles, a significant reduction from the CAFE II norm of 113 g/km (effective from April 2022 to March 2027).
   • Lighter vehicles face stricter CO₂ targets, while heavier vehicles are allowed slightly higher emissions.
2. Scope and Applicability:
   • Applies to all passenger vehicles under 3,500 kg, including petrol, diesel, LPG, CNG, hybrid, and electric vehicles (EVs).
   • Extends to light commercial vehicles (LCVs), though some manufacturers have sought exemptions for certain LCV categories due to cost burdens.
   • Unlike Bharat Stage (BS) VI norms, which focus on pollutants like NOx and SOx, CAFE III targets CO₂ emissions and overall fuel consumption.
3. Super Credits for Low-Emission Vehicles:
   • CAFE III enhances incentives for cleaner technologies:
     • Fuel Cell Electric Vehicles (FCEVs): Super credit multiplier increased from 3 to 5.
     • Battery Electric Vehicles (BEVs): Multiplier increased from 3 to 4 (proposed to be reduced to 3 for CAFE IV, 2032–2037).
     • Plug-in Hybrid Electric Vehicles (PHEVs): Multiplier of 2.5.
     • Hybrid Electric Vehicles (HEVs): Multiplier of 2.
   • A reduction factor of 0.98 is applied for technologies like regenerative braking, start-stop systems, and advanced transmissions to lower calculated CO₂ emissions.
4. Support for Flex-Fuel Vehicles:
   • Unlike CAFE II, which favored EVs, CAFE III balances incentives for EVs and flex-fuel vehicles (using ethanol blends like E20, 20% ethanol, 80% petrol). This aligns with India’s goals to reduce oil imports and boost domestic ethanol production, supporting rural economies.
   • The government is exploring Russian technology to improve ethanol’s energy efficiency, addressing its lower calorific value compared to petrol.
5. Alignment with Global Standards:
   • CAFE III aligns with India’s preparations for Bharat Stage VII (BS-VII) norms, which mirror Euro 7 standards (effective in Europe from July 2025). This ensures compatibility for exporting Indian-made vehicles.

Implementation and Timeline

• CAFE I (2017–2022): CO₂ limit of 130 g/km.
• CAFE II (2022–2027): CO₂ limit of 113 g/km.
• CAFE III (2027–2032): CO₂ limit of 91.7 g/km, effective from April 2027.
• CAFE IV (2032–2037): Proposed norms with even stricter targets, potentially reducing EV super credits to 3.

Challenges and Industry Concerns

1. Impact on Small Cars:
   • Maruti Suzuki’s Concerns: The weight-based formula penalizes lighter vehicles (e.g., hatchbacks like Alto, WagonR) with stricter CO₂ targets, making compliance costlier. Maruti, which dominates the small car segment (60% of the passenger vehicle market), argues that this could render small cars unaffordable, excluding middle-class buyers. Sales of small cars dropped 40% from 2.2 million units in FY19 to 1.35 million in FY25.
   • Maruti has requested exemptions for vehicles under 1,000 kg or differentiated norms based on GST criteria (vehicles <4m with engines up to 1,200 cc petrol/1,500 cc diesel).
   • Critics, including Mahindra, Tata Motors, and Hyundai, argue that exemptions would dilute CAFE III’s stringency, lock in higher emissions, and undermine India’s 30% EV penetration goal by 2030.
2. Cost Implications:
   • Compliance requires costly upgrades (e.g., hybrids, EVs), potentially increasing vehicle prices, especially for small cars. This could shift manufacturer focus to heavier vehicles like SUVs, which face less stringent targets.
   • Despite rising costs, demand remains strong (4.3 million vehicles sold in FY24), driven by increasing disposable incomes.
3. Penalties for Non-Compliance:
   • In FY 2022–23, eight carmakers, including Hyundai, Kia, Mahindra, and Honda, exceeded CAFE II limits, facing penalties of ₹25,000–₹50,000 per vehicle.
   • Maruti Suzuki and Tata Motors complied with CAFE II, achieving 104.73 g/km and 105.75 g/km, respectively, against their targets.
4. Flex-Fuel Challenges:
   • Ethanol’s lower energy density increases fuel consumption, potentially raising CO₂ emissions unless offset by technological improvements.
   • Industry advocates for a biogenic factor (14.3% for E20, 22.2% for flex-fuel vehicles) to account for ethanol’s renewable nature in CO₂ calculations.