If you are planning to buy a new petrol or diesel car in the coming years, then this news is important for you. The Central Government has released new draft Corporate Average Fuel Efficiency (CAFE)-III rules, which aim to increase fuel efficiency of vehicles and reduce carbon emissions.
Business News: The Government of India has released draft rules for Corporate Average Fuel Efficiency (CAFE-III) for passenger vehicles. These proposed standards aim to reduce vehicle fuel consumption, reduce carbon dioxide (CO₂) emissions and promote clean and sustainable transportation technologies. If these rules are finally implemented, their effective date will be April 1, 2027 and they will remain in force for the next five years.
Automobile industry experts believe that to meet the new standards, automakers may have to increase investment in engine technology, hybrid systems and alternative fuel-based vehicles. This is likely to increase the initial prices of some petrol and diesel cars, although consumers may benefit from better mileage and lower fuel costs in the long run.
What is CAFE-III and why is it important?
CAFE (Corporate Average Fuel Efficiency) standards are based not on a single vehicle, but on the average fuel efficiency of an entire fleet of cars sold by an automaker. Its aim is to ensure that vehicle manufacturers develop more fuel-efficient and less polluting models.
The government believes that these rules will help India achieve its climate goals, reduce dependence on fossil fuels and promote clean transportation systems.
On which vehicles will the new rules apply?
The proposed CAFE-III standards will be applicable to M1 category passenger vehicles. This category includes those cars which have a seating capacity of maximum eight passengers in addition to the driver. According to the draft, these rules will be applicable to vehicles manufactured or imported between 2027-28 to 2031-32. According to the draft rules, automakers will have to make a phased improvement in the average fuel consumption of their entire car line-up.
The government has set the average fuel consumption target for 2027-28 at about 3.996 liters per 100 km, which is proposed to be reduced to 3.3273 liters per 100 km by 2031-32. During the same period, carbon dioxide emission standards will also be gradually tightened. This will force vehicle companies to use more efficient engines, lighter vehicles and new technologies.
Clean fuel and green technology will be encouraged
A key feature of the CAFE-III draft is the proposal for a Carbon Neutrality Factor (CNF). Under this arrangement, additional benefits can be given to those vehicles which use alternative and less polluting fuels. These include:
- ethanol based vehicles
- flex-fuel vehicles
- biofuel based vehicles
- Compressed Biogas (CBG) Vehicles
- Electric Vehicle (EV)
- plug-in hybrid vehicle
- Strong Hybrid Model
The government aims to encourage companies to adopt clean technology and increase the share of eco-friendly vehicles.
Credit-debit system to follow rules
The draft rules also propose a credit and debit system for vehicle manufacturers. If a company performs better than the set standards, it will get credit. Whereas the companies which will not be able to achieve the set target, they will be able to buy credits from other companies or get credits from the Bureau of Energy Efficiency (BEE) at a fixed price.
As per the initial proposal, the starting price of a credit has been kept at ₹2,500, with a provision for increase every year. If a manufacturer does not comply with the prescribed rules, it may be subject to fines and other regulatory action under applicable laws.
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