CAFE norms, with their emphasis on weight, resemble the US approach of privileging large ICE vehicles | Photo Credit: plherrera

After more than a year of debate, the Centre has notified the third phase of Corporate Average Fuel Economy (CAFE) norms for passenger vehicles, to come into effect from April 1, 2027, for five years. Since April 2024, there have been discussions over three broad issues: whether the draft does, or should, favour small cars; the merits of ‘super credits’ to electric vehicles; and the question of regarding EVs as being truly pollution free.

To that, there’s a recent fourth dimension — whether the ethanol blending mandate should affect fuel emission standards. But broadly speaking, the new norms do little to alter the status quo in favour of creating a fuel-efficient, cleaner auto sector. The CAFE norms revolve around a central formula that spells out the permissible annual average fuel consumption of an auto maker, essentially based on the weighted average of its fleet. A fuel efficiency standard here is equated to a carbon emissions standard. The final norms, compared with its draft versions, do away with a carve out for small cars and instead tweak the formula a bit to help this category. It is beyond doubt that small cars are more fuel efficient than big ones. Yet, the fact remains that despite tweaks in the formula to help small cars, large cars get away with less stiff fuel economy standards.

This is because the permissible fuel consumption, in the ultimate analysis, goes up or down with the average weight of the OEMs’ fleet — notwithstanding changes in the coefficients and constant values that make up the formula. Two of the three such values — pertaining to fuel economy, reference weight and a multiplier that links the two — decline slowly over five years, which lowers, and therefore tightens, the fuel consumption target. Since this transition is a gentle one, OEMs are not really complaining. But this is not good news for people at large — especially if large vehicles continue to have their way, literally speaking, on the roads. They guzzle fuel (an incongruity in these times of fuel stress) and occupy too much road and parking space — for which they must cough up more taxes.

Besides, generous super-credits for EVs can arguably do little to promote their output. A supercredit of three for EVs (counting one as three EVs) means that the real fleet of an OEM is less green on the ground than it is on paper, actually allowing more ICE vehicles output. The rewards for hybrids and flex cars have been rightly reduced from earlier drafts. It is a stretch to regard EVs as emissions free, when most power generated comes from coal. By that token, ethanol too has high life-cycle emissions. A concession in standards for petrol vehicles on account of the blending mandate is questionable. Finally, CAFE norms, with their emphasis on weight, resemble the US approach of privileging large ICE vehicles. Instead, a strict, industry-wide fuel efficiency standard should be set without any reference to weight, giving OEMs the freedom to devise their mix of vehicles.

Published on October 2, 2026