Government Notifies Cafe-III Fuel Efficiency Norms From April 2027; Eases Targets for Lighter Vehicles

New Delhi: The government has notified the third phase of Corporate Average Fuel Economy (CAFE) norms for passenger vehicles, setting relatively softer efficiency targets for lighter cars and requiring greater fuel-efficiency improvements from heavier vehicles. The new norms will apply to new passenger vehicles manufactured or imported for sale in India.

As per the notification issued by the Ministry of Power, the third phase of corporate average fuel economy (CAFE-III) norms for passenger vehicles will come into effect from April 1, 2027, and remain applicable up to March 31, 2032. “Under the norms notified late on Tuesday, instead of an explicit small-car concession, the revised target line has been flattened to provide a more balanced, weight-sensitive approach, ending a long contentious debate between automakers over the treatment of small versus large cars,” the ministry said.

With the move, Maruti Suzuki India, the country's largest small-car maker, is expected to gain the most from the revised weight-based framework as lighter vehicles face relatively softer efficiency targets than those specified under the September 2025 draft. In the new norms, the reference weight has been increased from 1,082 kg under existing norms to 1,229 kg under new CAFE norms, an increase of around 13.6 per cent, reflecting the evolving characteristics of the passenger vehicle fleet.

The auto industry was divided between two groups — one pitching for some special consideration for small cars, and the other seeking benefits for EVs and bigger cars. A section of carmakers, including Tata Motors, had earlier opposed any leniency for small cars based on weight and affordability, whereas bigger players like Maruti Suzuki India had argued that the idea behind the new norms was to make big cars improve fuel efficiency and reduce emissions.

The September 2025 draft had proposed an additional 3 grams per km deduction in declared CO2 emissions for petrol cars weighing up to 909 kg, with engine capacity not exceeding 1,200 cc and length not exceeding four metres. The final norms drop that separate carve-out but instead flatten the weight-based target curve, giving lighter vehicles greater relief compared with the September 2025 draft.

The new CAFE norms also seek over 16 per cent improvement in fuel efficiency over five years, stipulating progressive improvements in fuel economy through year-on-year tightening of targets across all five years. “The fuel-consumption benchmark is tightened from 3.996 litres/100 km in 2027-28 to 3.3273 litres/100 km in 2031-32, representing an improvement of around 16.7 per cent over the period,” the ministry said.

The norms also provide manufacturers with multiple compliance pathways, including incentives for electric vehicles, hybrids, flex-fuel vehicles, alternative fuels and fuel-saving technologies. “The framework recognises the contribution of renewable and low-carbon fuels, including ethanol-blended petrol, biofuels and CBG, through the introduction of the carbon neutrality factor,” it added.