Introduction
The Draft Corporate Average Fuel Efficiency (CAFE-III) norms for the FY 2028–32 period mandate a progressive tightening of fleet-average carbon dioxide emissions from 94.76 gCO2/km down to 78.90 gCO2/km, alongside migrating from the Modified Indian Driving Cycle (MIDC) to the Worldwide Harmonised Light Vehicles Test Procedure (WLTP). While intended to decarbonise the transport sector, the framework incorporates generous compliance flexibilities that risk diluting the imperative for genuine technological transformation.
Proposed Flexibility Mechanisms in Draft CAFE-III
- Super-Credits: The draft provides volume multipliers for low-emission vehicles, offering a 3x multiplier for Battery Electric Vehicles (BEVs) and 1.6x for strong hybrids when calculating fleet averages.
- Carbon Neutrality Factor (CNF): Manufacturers receive an 8% tailpipe emission reduction credit on account of national ethanol blending targets, irrespective of individual vehicle adjustments.
- Block Averaging: Compliance is assessed over multi-year windows (an initial three-year block followed by a two-year block) rather than through strict annual targets.
- BEE Buyout Provision: Automakers facing a compliance deficit can directly purchase compliance credits from the Bureau of Energy Efficiency (BEE) at a pre-set rate of ₹2,500 per credit.
Critical Examination: Dilution of Climate and Energy Security Goals
- Emission Masking via Super-Credits: High multipliers for electric vehicles enable original equipment manufacturers (OEMs) to offset emissions easily, permitting the continued aggressive manufacturing and sale of heavy, high-emission internal combustion engine (ICE) vehicles and SUVs.
- Weak Disincentives for Non-Compliance: A relatively low BEE credit buyout rate of ₹2,500 functions as an inexpensive escape clause compared to stringent penalties under the Energy Conservation Act, disincentivising heavy R&D expenditure on fuel-efficient powertrains.
- Delayed Decarbonisation Momentum: Multi-year block averaging permits backloading of efficiency upgrades, which slows the year-on-year fuel reduction necessary to curb India's high crude oil import dependency and meet its Nationally Determined Contributions (NDCs).
- Tailpipe vs. Lifecycle Disconnect: Fuel efficiency accounting remains tied to tailpipe emissions without integrating Life Cycle Assessment (LCA), conferring zero-emission benefits to electric mobility without factoring in India's fossil-heavy grid emission intensity.
Way Forward
- Shift to Footprint-Based Benchmarks: Transition from weight-based utility parameters to vehicle footprint parameters to avoid creating regulatory incentives for heavier, bulkier vehicle classes.
- Rationalisation of Super-Credits: Progressively taper and cap super-credits to avoid double counting and compel incremental efficiency improvements in conventional powertrains.
- Empirical Verification via RDE: Integrate Real Driving Emissions (RDE) testing into CAFE compliance to bridge the divergence between laboratory WLTP cycles and real-world fuel consumption.
Conclusion
Balancing industrial transition with climate commitments requires CAFE-III to function as an engine of technological overhaul rather than a regulatory compliance loophole. Strengthening enforcement benchmarks and closing flexibilities will ensure that the automotive sector meaningfully supports India's energy self-reliance and Net-Zero 2070 ambitions.