India relaxes fuel efficiency targets in revised CAFE III norms draft

The Indian government has released a revised draft of the Corporate Average Fuel Efficiency (CAFE) III norms, relaxing previously proposed fuel economy targets for automakers. The new draft, published by the Ministry of Road Transport and Highways, aims to balance environmental goals with industry concerns over feasibility and investment costs.

What the revised norms change

The updated CAFE III draft eases the fuel consumption targets that automakers would need to meet by 2027. Earlier proposals had required a significant reduction in CO2 emissions per kilometre, but the latest version gives manufacturers more room to comply.

Industry sources say the relaxation was driven by feedback from carmakers who argued that the original targets were too aggressive, especially given the current pace of electrification in India. Petrol and diesel vehicles will now face less stringent standards, though the government has not specified the exact revised figures.

Special treatment for ethanol and biofuel cars

A key feature of the new draft is the special recognition given to vehicles that run on ethanol and biofuels. These cars will be counted differently under the CAFE calculation, potentially allowing automakers to offset the lower efficiency of their conventional petrol and diesel models.

This move aligns with the government's broader push to promote alternative fuels and reduce dependence on imported crude oil. India currently imports over 80% of its oil, and the transport sector accounts for a large share of consumption.

Confusion over REEVs and hybrids

The revised norms have also sparked debate over how range-extended electric vehicles (REEVs) should be classified. REEVs are essentially electric cars with a small petrol engine that charges the battery when it runs low. The draft rules treat them differently from pure electric vehicles and plug-in hybrids, but the exact criteria remain unclear.

Automakers say this ambiguity could complicate product planning and investment decisions. Some industry experts argue that REEVs should be considered electric vehicles for CAFE purposes, while others believe they should be grouped with hybrids.

The draft is currently open for public comments, and the government is expected to finalise the norms later this year.

What this means for car buyers

For consumers, the relaxed targets mean that automakers may not need to rush into launching more electric or hybrid models to meet CAFE requirements. Petrol and diesel cars could remain on sale longer, though fuel efficiency improvements will still be pursued.

However, the special treatment for ethanol and biofuel vehicles could lead to more such models entering the market. This might give buyers more choices, especially in states where ethanol-blended petrol is already available.

The government's decision to relax targets has drawn mixed reactions. Environmental groups have criticised the move, saying it undermines India's climate commitments. Industry bodies have welcomed it, calling it a pragmatic step that supports manufacturing growth.

The final version of CAFE III norms is expected to be notified by early 2027. Automakers will then have to comply with the new standards over a phased timeline.