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India’s CAFE-III rules set tighter fuel-consumption limits for manufacturers’ passenger-vehicle fleets from 1 April 2027 to 31 March 2032. They do not require every car to meet one mileage figure, and they do not establish which models will change or what buyers will pay. The notified framework gives automakers several ways to manage compliance, including more efficient vehicles, selected technologies and powertrains, and credits.
What CAFE-III means for cars sold in India
CAFE-III is the third phase of India’s Corporate Average Fuel Economy standards. The Ministry of Power notified it on 29 September 2026, with implementation beginning on 1 April 2027. It applies through 31 March 2032 to covered M1 passenger vehicles manufactured or imported for sale in India. The category broadly covers vehicles with up to nine seats, including the driver, and a gross vehicle weight no greater than 3,500 kg; the notification lists exemptions, including invalid carriages and special-purpose vehicles. See the final notification, S.O. 5346(E) and the Ministry of Power summary.
The key distinction is that this is a manufacturer-level fleet rule, not a standalone mileage mandate for each model. A company’s covered vehicles are assessed together using a sales-volume-weighted calculation linked to their average unladen mass. A car can therefore sit above or below the headline benchmark without that figure being its individual legal limit. BEE’s CAFE overview also explains the difference between a corporate fleet average and an individual model’s fuel consumption.
How the annual benchmark tightens
The notification expresses the standard in petrol-equivalent litres per 100 km and calculates it on the Modified Indian Driving Cycle (MIDC). Its formula is a × (W − b) + c: W is the manufacturer’s weighted average unladen mass for its covered new vehicles, and the constants vary by year. The weight-linked formula means a manufacturer’s permitted standard depends in part on its fleet composition.
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| Financial year | Benchmark c (petrol-equivalent litres/100 km) |
|---|---|
| 2027–28 | 3.9960 |
| 2028–29 | 3.8600 |
| 2029–30 | 3.7585 |
| 2030–31 | 3.5313 |
| 2031–32 | 3.3273 |
The Ministry describes the endpoint change as an improvement of around 16.7% between 2027–28 and 2031–32. These are regulatory fleet-calculation benchmarks, not a promise that an individual car will deliver that fuel economy in ordinary driving. The notification uses MIDC; the Ministry summary says reporting is undertaken under both MIDC and WLTP. The Ministry also says the reference weight has risen from 1,082 kg under the existing norms to 1,229 kg under the new norms—about 13.6%—and characterizes the revised line as relatively softer for lighter vehicles and more demanding for heavier ones.
What manufacturers can do to comply
CAFE-III leaves manufacturers more than one route to manage their fleet average. The Ministry says the framework expands recognized fuel-conservation technologies from four to twelve. The notification includes measures such as start-stop systems, tyre-pressure monitoring, regenerative braking, six-speed-or-higher transmissions, efficient alternators, motor-generators, exterior LED lighting, advanced glazing, electric water pumps, efficient air conditioning, solar-reflective paint, and PWM-controlled radiator fans.
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Eligible technologies can receive a 1 g CO₂/km derogation each, up to a 9 g CO₂/km cap. Certification and verification requirements differ across block periods, so listing a technology does not by itself establish how a particular vehicle or manufacturer will be credited.
The rules also account for specified fuels and vehicle types. The Ministry summary names ethanol-blended petrol, biofuels, and compressed biogas in its Carbon Neutrality Factor discussion. It says battery-electric vehicles (BEVs), range-extended electric vehicles (REEVs), plug-in hybrid electric vehicles (PHEVs), strong hybrids, and flex-fuel vehicles receive volume derogation factors, often described as super credits, in fleet calculations. These are distinct adjustments; they do not mean that every alternative-fuel vehicle automatically satisfies a manufacturer’s obligation.
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For compliance administration, the framework provides specified two- or three-year blocks, carry-forward provisions, exchanges or trades of eligible credits between manufacturers, and a buyout administered by the Bureau of Energy Efficiency (BEE), subject to the notification’s conditions. The Ministry says manufacturers with annual sales below 1,000 units are exempt from fleet-average obligations. The notification is the source for legal detail; the Ministry’s summary describes the broad mechanism.
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The fleet target creates an incentive for manufacturers to manage the efficiency of their overall India-bound line-up. They could combine improvements to conventional vehicles with electrification, hybrids, qualifying technologies, lower-carbon fuels, or eligible credits. The regulation itself does not specify which route any company will choose.
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As of 3 October 2026, the cited notification and Ministry summary do not identify manufacturer plans, a list of models to be redesigned or discontinued, predicted retail prices, or independent estimates of fuel savings for owners attributable to CAFE-III. It would be misleading to infer a specific car’s future or a price increase from the fleet benchmark alone.
When comparing cars, assess their certified efficiency and test cycle separately from purchase price, fuel or powertrain, expected running costs, size and use case, and real-world driving conditions. CAFE-III does not answer those model-specific questions.
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How CAFE-III fits into the earlier rules
CAFE standards are not new to India: BEE records that the first phase applied from 2017–18 and the second from 2022–23. BEE circulated a draft for the 2027 phase in September 2025, but the notified 2026 framework—not the earlier draft—is the controlling source for the 2027–32 requirements.
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