New Delhi: The government is preparing to tighten fuel efficiency rules for carmakers under the upcoming Corporate Average Fuel Efficiency (CAFE) III norms. Officials say the new rules will try to balance the interests of both large and small manufacturers. Bigger carmakers may face tougher targets, while smaller ones could get limited relief. However, the special exemption earlier given to small cars is likely to be removed.
The Centre is planning key changes in the final version of the policy. These changes were made after reviewing earlier drafts and are expected to be sent to the Prime Minister’s Office. The final notification was earlier expected by the end of February but it may now take more time, says The Economic Times.
Stricter rules for heavier vehicles
One of the main changes is in the “slope value” under CAFE III. In the September 2025 draft, the slope value was set at 0.002. Officials now indicate it may be reduced to 0.00153 in the final version. The slope value decides how much extra carbon dioxide (CO2) emission is allowed based on a vehicle’s weight.
A higher slope allows heavier vehicles to emit more CO2, making it easier for large SUVs and premium cars to meet targets. When the slope is reduced, the rules become tougher. Big and heavy vehicles will not get as much extra room for emissions as before. In simple terms, SUVs and larger cars will have to cut pollution more seriously. This could push companies to put more money into hybrid or electric options if they want to stay within the limits.
No more special relief for small cars
Earlier, small cars were given a derogation, or extra allowance, under the rules. This category-specific exemption is now likely to be removed. While officials say flattening the slope gives some indirect relief to lighter cars, there will no longer be a separate safety net for them.
However, it might increase the cost of entry-level petrol cars. Manufacturers may have to add more fuel-saving technologies to comply with the new norms. If they fail to meet the targets, they could face penalties.
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