India proposes stricter CAFE-III fuel efficiency standards

The Indian government has proposed a significant tightening of fuel efficiency standards for passenger vehicles, releasing draft regulations for the third phase of its Corporate Average Fuel Economy (CAFE) program. The Ministry of Power published the draft CAFE-III norms on July 16, 2026, inviting public and stakeholder comments until August 6.

The proposed norms are slated to take effect on April 1, 2027, following the expiration of the current CAFE-II regime, and will remain in force for five years, applying to vehicles manufactured or imported for sale from the 2027-28 to 2031-32 financial years. The regulations target M1 category passenger vehicles, defined as those with no more than eight seats in addition to the driver's seat.

A central feature of the draft is a progressive tightening of fleet-average fuel consumption targets. The benchmark will become more stringent each year, moving from 3.996 litres per 100 kilometers (94.76 grams of CO2 per km) in 2027-28 to 3.3273 litres per 100 km (78.90 grams of CO2 per km) by 2031-32. Officials stated this phased approach is intended to provide automakers with regulatory certainty and time to develop more fuel-efficient models.