CAFE III: the new fuel economy norms for cars
LeadPrelims and MainsSeptember 2026
Why in news
On 30 September 2026 the Ministry of Power notified new CAFE norms for passenger vehicles, in force from 1 April 2027 to 31 March 2032.
- about 16.7 per centimprovement in fleet fuel economy required over the period
- 3 timeshow an electric car counts in a maker's fleet average
- 89 per centof India's crude oil that is imported
Background
- CAFE norms cap the average fuel consumption of all the cars a manufacturer sells in a year, and not of each model.
- They were first introduced in 2017 under the Energy Conservation Act, and the norms now notified are their third round, known as CAFE III.
How the target works
- Each maker gets a fleet average target, tied to the average weight of the cars it sells, so a maker of heavier cars gets a different target from a maker of small ones.
- The target line has been flattened, so heavier cars face stiffer demands than before.
Rewards for cleaner cars
- Super credits count a cleaner car more than once: an electric car counts three times, and hybrids and flex fuel cars count for more than one.
- A Carbon Neutrality Factor gives credit for low carbon fuel such as ethanol blended petrol, biofuels and compressed biogas.
Trading and the small car question
- Credits can be banked, traded between manufacturers, or bought through a buyout run by the Bureau of Energy Efficiency.
- A proposed extra relief for small petrol cars was dropped, in favour of a single formula based on weight.
The way forward
- India imports nearly 89 per cent of its crude oil, so fuel economy norms are an energy security measure as much as a climate one.
- Because an electric car counts three times, each one sold eases the target for the rest of a maker's fleet, which rewards electric cars without a subsidy.
Prelims facts
- CAFE norms are notified by the Ministry of Power under the Energy Conservation Act; the Bureau of Energy Efficiency runs the buyout of credits.
- They apply to a manufacturer's fleet average, not to each model.
- An electric car counts three times in the fleet calculation.
Sources: PIB, 30 Sep 2026: NEW CORPORATE AVERAGE FUEL ECONOMY (CAFE) NORMS NOTIFIED (opens in a new tab) · The Indian Express, 30 Sep 2026: What India's new CAFE-III fuel-efficiency norms mean for carmakers, small cars and EVs (opens in a new tab) · PIB, 16 Sep 2026: Shri Rajiv Gauba Calls Electric Mobility a "Strategic Imperative" for Viksit Bharat as NITI Aayog Launches Second Edition of India Electric Mobility Index (opens in a new tab)
Earlier coverage: Corporate Average Fuel Economy norms · The monthly magazine, September 2026