Government, auto industry move closer on CAFE-III norms after key draft review

The government and the auto industry have stepped up discussions on the next phase of fuel efficiency rules, with a key meeting on Thursday aimed at building consensus on the draft Corporate Average Fuel Efficiency (CAFE-III) norms. Sources said the latest proposal has now found wider acceptance among stakeholders, even as implementation is expected to begin in April 2027.

The meeting was convened by the Bureau of Energy Efficiency under the Ministry of Power. It brought together secretaries from the Ministry of Road Transport & Highways, the Ministry of Power and the Ministry of Heavy Industries, along with representatives from original equipment manufacturers and other industry stakeholders.

According to sources, the purpose was to hear objections and suggestions before the draft rules were given a final shape. The government wanted to understand where automakers stand, especially after differences emerged over how the norms should apply to different types of vehicles.

Small car makers seek relief

The main point of disagreement came from smaller car makers, who argued that the rules should be more lenient for them based on weight and affordability. Large OEMs opposed that position, saying different treatment could hurt safety standards and create an uneven market.

Despite those concerns, sources said the overall response has moved in the government’s favour. "The industry has more or less accepted the latest draft rules. The government officials told auto-makers that the motive behind drawing up the latest fuel efficiency norms is not to penalise them but to nudge them towards more fuel-efficient vehicles," sources close to the development said.

Push for wider fuel choices

Officials also encouraged manufacturers to look beyond battery electric vehicles. They were told to explore a wider mix of cleaner technologies, including hybrids, flex fuels and compressed bio-gas. The message, sources said, was that compliance should not be limited to one route alone.

Credits and compliance system

The draft rules also include a credit trading framework. Manufacturers that cut emissions beyond the target will be allowed to sell surplus carbon credits to those that fall short, based on mutual agreement. In addition, OEMs can offset any debit balance in their passbook by buying credits from the Bureau of Energy Efficiency.

Sources said the government is unlikely to delay the rollout of CAFE-III, which is scheduled to take effect from April 2027 and remain in force until March 31, 2032.

(With inputs from PTI)

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