No detours: CAFE III starts in April 2027

New Delhi: Indian carmakers will be required to adhere to stricter fuel efficiency norms from April 1, 2027, with the government deciding to adhere to the latest schedule for implementation of the Corporate Average Fuel Efficiency (CAFE) III norms, officials said.The Prime Minister’s Office held a meeting on Wednesday to discuss the proposed framework, they said. “The CAFE III guidelines will be ready by the end of March,” a senior official told ET, stressing that there will be no relaxation in the timeline.

Automakers will face fines if they fail to meet the lower emissions mandate by March 31, which will gradually become stricter. The auto industry had pushed for the implementation timeline to be pushed back.

However, the government believes that the industry has been given sufficient time to prepare.Under the draft proposal, carmakers that sell vehicles with higher emissions will face financial penalties. However, those who produce electric vehicles (EVs) and hybrids can offset these fines by earning credits from selling eco-friendly cars or purchasing them from other automakers that have robust credits.

The government has so far released two drafts of the proposed CAFE-III: the first in 2024 and the second in September 2025.

The latest iteration, currently under investigation, is an updated version of the September draft, prepared after consultation with stakeholders. The Bureau of Energy Efficiency (BEE), the nodal agency for tightening emissions standards, has proposed in the latest draft to reduce corporate average emissions to 77.08 g of carbon dioxide per kilometer (CO2/km) by 2032.

The sector is in favor of a flat emissions target of 89.6 g CO2/km for the entire CAFE III period. The September 2025 design aimed for a reduction from 92.11 g CO2/km to 76.01 g CO2/km.

These targets will be calculated based on the expected sales distribution based on data from the International Center for Automotive Technology (ICAT) and the Society of Indian Automobile Manufacturers (SIAM).

Industry watchers say the targets in the current draft – a drop from 92.50 grams to 77.08 grams – provide marginal breathing space for automakers compared to the earlier proposal. However, automakers are concerned about maintaining strict annual emissions tightening, an industry insider said.

Officials said the industry demands are being balanced with stricter fuel efficiency targets for the big automakers, while showing some leniency to the smaller ones. However, a blanket safety net could disappear if a derogation or extra allowance for small cars is ended, she added.