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Corporate Average Fuel Economy norms
Copy link to Corporate Average Fuel Economy normsPrelims and Mains
LeadCAFE III: the new fuel economy norms for carsSeptember 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.
Corporate Average Fuel Economy (CAFE) norms cap the average fuel consumption, and so the carbon dioxide, of all the cars a manufacturer sells in a year, and not of each model.
- They were introduced in 2017 under the Energy Conservation Act and are notified by the Ministry of Power.
- The target is adjusted for the average weight of a maker's fleet.
- A maker that beats its target earns credits, and one that falls short must buy them.
What changed
30 Sep 2026LeadCAFE III: the new fuel economy norms for cars