The government has proposed a flatter emission curve under the upcoming Corporate Average Fuel Efficiency (CAFE) III norms, aimed at easing fleet-wide carbon dioxide targets for automakers starting from FY28. The revised draft, circulated among car manufacturers by the Bureau of Energy Efficiency (BEE), removes any separate concessions for small cars, meaning OEMs with a higher share of smaller, lighter vehicles will no longer receive higher emission allowances based on weight.
However, the flatter emission slope could make compliance easier for vehicles below the industry average weight of 1,229 kg, while tightening expectations for heavier vehicles. Compared to the initial proposal released in September 2025, the revised draft relaxes fleet-wide emission targets by around 21 percent. The emission slope, earlier set at 0.002 across all five years, has now been reduced to 0.00158 in the first year, gradually declining to 0.00131 by the fifth year. According to industry executives, this adjustment is intended to accelerate adoption of hybrid and electric vehicles while offering relief to manufacturers producing smaller and lighter cars.
Industry representatives also noted that the revised draft removes the earlier relaxation of 3 g/litre for small cars weighing up to 909 kg, instead offering broader flexibility through the flatter slope. Unlike Japan’s model-level emission targets, India continues to follow fleet-level targets similar to those in Europe and the United States, a framework reaffirmed in the new proposal.
Officials from the ministries of power, heavy industries, and road transport and highways, along with industry stakeholders, are expected to meet next week to finalise the updated norms.
The latest draft also revises super credits — regulatory incentives that allow low-emission vehicles to be counted multiple times toward fleet averages. Battery electric vehicles have been granted the highest super credit of three, reinforcing the government’s strong push for zero-emission mobility. Range-extender electric vehicles retain a super credit of three, while strong hybrids see their credit reduced to 1.6 from the earlier proposed two.
The draft also introduces a pooling mechanism, allowing OEMs to trade emission credits if they fall short of targets. Manufacturers may also purchase credits directly from BEE, with prices set at ₹2,500 per g CO2/km for FY28, increasing annually to ₹4,500 by FY32. Penalties have also been outlined for manufacturers that fail to meet annual fleet-wide emission targets.
While the implementation date for CAFE III remains April 1, 2027, automakers have indicated that meeting the deadline may be challenging unless the final notification is issued within the next few days.
