India's government rolled out the third draft of CAFE-III norms, setting fuel efficiency standards for passenger vehicles through 2031-32 . Released July 17, 2026, this draft keeps much of what was in earlier proposals,after tough talks between makers of small cars and larger SUVs.
Draft now lets ethanol, compressed biogas (CBG),and other biofuels count in compliance calculations,helping automakers cut declared CO₂ emissions. Feedback deadline is August 6, following a year of heated debate over compliance formulas .
Key change: a new weight-adjustment curve, less steep than the one proposed in September 2025 . This change cuts the compliance edge heavier SUVs had, while easing targets for lighter vehicles. Fleet-wide emission targets are about 21% more lenient than before.
Manufacturers must gradually boost fleet fuel efficiency,tightening from 3.996 liters per 100 km (94.76 gCO₂/km) in 2027-28 to 3.327 liters per 100 km (78.90 gCO₂/km) by 2031-32. Compliance will be checked over two periods: first three years, then two,instead of annually.
New Carbon Neutrality Factors (CNFs) allow certain CO₂ emission reductions for vehicles using ethanol,flex-fuel ethanol,CBG,and other biofuels before compliance checks. Draft also offers incentives for approved fuel-saving tech and continues super credits for electric and hybrid vehicles. Manufacturers exceeding targets can trade compliance credits; those falling short can buy credits from others or the Bureau of Energy Efficiency (BEE).
Despite tweaks, draft mostly mirrors April's proposal,showing government sticks with compromise after intense talks. Previous version had flattened weight-adjustment curve and eased compliance rules, addressing major industry concerns.
Latest draft's weight-adjustment curve starts at 0.00158 in year one, drops to 0.00131 by year five. Earlier proposal had flat 0.002 slope for all five years . Draft also scraps a 3-gram CO₂ emissions break for small cars under 909 kg with sub-1200 cc engines, removing a divisive point among automakers.
Manufacturers clashed throughout CAFE-III talks. Tata Motors opposed the 3 g CO₂/km perk for smaller cars,arguing against breaks for small vehicles while big firms invest in electrification. Maruti Suzuki,however, defended small car perks,with Senior Exec Rahul Bharti citing similar rules in Europe, US,China, Japan, and South Korea.
Another sticking point: weight-based compliance formula in earlier drafts,seen as favoring heavier vehicles. Under CAFE, emission targets are based on fleet's average weight. Critics said the formula's slope grew too lenient with vehicle weight,giving bigger cars an easy ride.
Five-year CAFE III norms push for better emissions across manufacturer fleets, while tackling issues raised in drafting. As comment deadline nears, government seems set on balancing industry needs with environmental aims .
