The Ministry of Power has notified revised Corporate Average Fuel Economy (CAFE) Norms for passenger vehicles that will take effect from 1 April 2027 and remain in force until 31 March 2032. The new framework tightens fuel consumption requirements progressively over five years while offering manufacturers multiple compliance pathways and technology choices to meet stricter efficiency targets.
These norms will apply to all new passenger vehicles manufactured or imported for sale in India. The revision replaces the existing CAFE framework and aims to reduce fuel consumption across the vehicle fleet while supporting India’s energy security and environmental goals.
Key facts
- Effective date: 1 April 2027 to 31 March 2032
- Fuel consumption benchmark tightens from 3.996 litres per 100 km (2027-28) to 3.3273 litres per 100 km (2031-32)
- Overall improvement: 16.7 per cent in fuel efficiency over the five-year period
- Reference vehicle weight increased from 1,082 kg to 1,229 kg (13.6 per cent increase)
- List of recognised fuel-conservation technologies expanded from 4 to 12
- Exemption threshold: manufacturers with annual sales below 1,000 units
- Maximum credit concession for approved technologies: 9.0 g CO₂/km
How the norms will work
The new CAFE framework requires manufacturers to achieve progressively better fuel economy year by year. Instead of a single fixed target, each year from 2027-28 to 2031-32 has a tightening benchmark. A car manufacturer’s entire fleet must meet the average requirement for that year, not each individual model.
The framework uses a weight-sensitive approach. Lighter vehicles face relatively easier targets while heavier vehicles must achieve greater fuel efficiency gains. This recognises that different vehicle categories consume fuel differently. The reference weight was increased to reflect how modern vehicles are becoming heavier due to safety features, batteries and advanced technology.
Multiple pathways to compliance
Rather than mandating a single technology solution, manufacturers can choose from multiple routes to meet their CAFE obligations. The approved technologies now include advanced glazing, solar reflective paints and high-efficiency air-conditioning systems that reduce fuel consumption without requiring complete vehicle redesigns.
Electric and hybrid vehicles receive special recognition through “super credits” in fleet-average calculations. Battery electric vehicles, range-extended electric vehicles, plug-in hybrids, strong hybrid vehicles and flex-fuel vehicles count more favourably towards a manufacturer’s compliance targets, incentivising their production and sales.
For the first time, the framework recognises low-carbon fuels through a Carbon Neutrality Factor. Vehicles running on ethanol-blended petrol, biofuels and compressed biogas can improve a manufacturer’s fleet-level performance beyond vehicle efficiency improvements alone.
Flexibility during transition
Manufacturers can meet obligations over two-year or three-year compliance blocks rather than year-to-year, allowing them to manage technology transitions more smoothly. Manufacturers exceeding their targets earn credits that can be carried forward within compliance blocks, stored for future use or traded with other manufacturers.
Those with shortfalls can purchase credits through a buyout mechanism administered by the Bureau of Energy Efficiency, though this comes at a cost. This credit trading system allows larger manufacturers to support smaller ones during the transition while maintaining overall fleet efficiency improvements.
Measurement and reporting
Manufacturers will report fuel consumption data under both the Modified Indian Driving Cycle (MIDC) and the Worldwide Harmonized Light Vehicles Test Procedure (WLTP). This dual approach helps India gradually move towards globally harmonised vehicle testing standards while maintaining consistency with existing practice.
What this means for you
Car buyers can expect gradual improvements in fuel efficiency across new models from 2027 onwards. Vehicles should consume less petrol or diesel over time, reducing running costs. However, technological improvements and feature additions may affect vehicle prices.
Manufacturers must invest in cleaner technologies and alternative fuel vehicles to comply with tightening targets. This could accelerate availability of electric vehicles, hybrid models and vehicles powered by biofuels in India’s market. Small manufacturers producing fewer than 1,000 vehicles annually are exempt from these obligations, reducing regulatory burden on niche producers.
The framework supports India’s broader transition towards sustainable mobility while maintaining regulatory clarity for the automobile industry. By combining higher efficiency requirements with technology flexibility, the norms aim to balance environmental and energy security goals with industrial competitiveness.