CAFE 3 Norms in India: Key Features, Targets, Rules and Impact

Learn about CAFE 3 norms in India, their emission targets, fuel efficiency standards, and role in achieving India’s climate goals and net-zero emissions.

Table of Contents

Context: The Prime Minister’s Office (PMO) recently reviewed the proposed Corporate Average Fuel Efficiency (CAFE)-3 norms for passenger vehicles, which are scheduled to take effect from 2027. The Indian government and the automobile industry reached a broad consensus on the upcoming CAFE-III.

What are CAFE-III Norms?

CAFE (Corporate Average Fuel Efficiency) norms are government-mandated standards that regulate the weighted average fuel consumption and CO₂ emissions of an automaker’s entire fleet, rather than individual models.

Established By: The Bureau of Energy Efficiency (BEE) under the Ministry of Power.
Application: These norms apply to M1 category passenger vehicles (those designed to seat up to nine persons and weighing under 3,500kg).
Timeline: The third phase (CAFE-III) is scheduled to be implemented from April 1, 2027, and will run through March 31, 2032.

What is CAFE?

It was started from 2017 to set a limit on the average fuel consumption and CO2 emissions of a manufacturer’s overall fleet.
Aim: It aims to push carmakers to improve their overall fuel efficiency and reduce emissions.
Instead of regulating each vehicle individually, CAFE mandates that the average emissions of all vehicles sold by a manufacturer must remain below a specified limit.
The CAFE 2 began in 2022, and the next phase, CAFE 3, is all set to start from April 2027.
Implementation: It is implemented in India by the Bureau of Energy Efficiency (BEE) under the Ministry of Power, in coordination with the Ministry of Heavy Industries
Core Objective: To further tighten CO₂ emission limits (g/km) and establish fleet-wide fuel efficiency standards

Implementation in India

Introduced in 2017 (CAFE-1).
Strengthened under CAFE-2 (2022 onwards).
The next phase, CAFE-3, is expected to be implemented from April 2027.
These norms form a crucial part of India’s broader climate commitments, including achieving net zero emissions by 2070.

Aim of CAFE-III

To reduce India’s heavy reliance on crude oil imports, especially amid geopolitical uncertainties such as the West Asia crisis.
To nudge manufacturers toward producing energy-efficient and less-polluting vehicles in line with India’s climate goals.
To force the adoption of advanced technologies such as hybrids, electric vehicles (EVs), and flex-fuel systems.

Key Features of CAFE-3 Norms

Stricter Targets: Automakers must reduce their average fleet CO₂ emissions from approximately 113 g/km (at the end of CAFE-II in FY27) to 78.9 g/km by FY32.
Removal of Small Car Carve-out: An earlier proposal to provide specific 3g/km relief for petrol cars under 909kg has been scrapped in favour of a flatter curve to ensure a fairer playing field.
Super Credit Scheme: To encourage green technology, manufacturers earn multipliers for every clean vehicle sold:
Battery EVs (BEV): 0 multiplier (each sale counts as 3 for fleet average).
Plug-in Hybrids (PHEV): 5 multiplier.
Strong Hybrids: 6 multiplier.
Incentives for Efficiency Tech: Discounts on emission scores can be earned by using any of the 12 specified energy-efficient technologies, such as start-stop systems, 6-speed transmissions, and high-efficiency AC.
Compliance Flexibility: Allows for credit trading between manufacturers, carry-forward of excess compliance, and lower penalties to facilitate a practical transition.

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