The Centre has notified the third phase of carbon emission norms for passenger vehicles, effective from April 1, 2027 to March 31, 2032, under which each battery electric vehicle will count as three vehicles toward a carmaker’s fleet-efficiency calculation, while other cleaner technologies and biofuel-based vehicles will receive specified credits.

Under the new norms, the fuel-consumption benchmark will be tightened from 3.996 litres per 100 km in 2027–28 to 3.3273 litres per 100 km in 2031–32, amounting to an improvement of about 16.7% over the five-year period. The new norms will apply to new passenger vehicles manufactured or imported for sale in India. The Corporate Average Fuel Efficiency norms use 1,229 kg as the reference vehicle weight. The earlier concession for small cars weighing up to 909 kg has been removed following a pitched fight that split the auto industry.

The fleet’s average fuel consumption will be calculated using the Modified Indian Driving Cycle (MIDC) and expressed in petrol-equivalent litres per 100 km. For individual models, fuel consumption will be calculated using their notified tailpipe CO₂ emissions. Diesel, LPG, CNG and electric vehicles will be converted into petrol-equivalent figures using specified conversion factors. For electric vehicles, energy consumption will be measured in kWh per 100 km.

Under the CAFE-3 norms, carmakers can count each battery electric vehicle or range-extended EV as three vehicles, each plug-in hybrid or flex-fuel strong hybrid as 2.5 vehicles, each strong hybrid as 1.6 vehicles and each flex-fuel ethanol vehicle as 1.1 vehicles when calculating fleet fuel efficiency.

Manufacturers’ annual CAFE credits and debits can be carried forward or traded during a compliance block, while deficits can be offset by buying credits from the Bureau of Energy Efficiency; unused credits lapse at the block’s end. Credit-buyout prices will rise from ₹2,500 per g CO₂/km in 2027–28 to ₹4,500 per g CO₂/km in 2031–32, and credit trading or buyouts will be allowed only from October 1 to October 31 each assessment year.

Carbon Neutrality Factors will apply to petrol, CNG and flex-fuel ethanol vehicles, reducing a manufacturer’s declared CO2 emissions by 8% for E20 or higher ethanol-blended petrol vehicles, including strong and plug-in hybrids; 22.3% for flex-fuel ethanol vehicles; 5% or the notified compressed biogas blending percentage, whichever is higher, for CNG vehicles; and the actual biofuel-blending percentage for diesel vehicles, as specified by the Ministry of Petroleum and Natural.

Automakers can also claim a fuel-consumption reduction of 1 g CO₂/km for each eligible efficiency technology such as start-stop systems, tyre-pressure monitoring, regenerative braking, efficient alternators, LED lighting and electric water pumps subject to an overall cap of 9 g CO₂/km. Claims in the first compliance block may be self-declared, while those in the second must be supported by validated test results.