There is no mention of the earlier relaxation of 3g/litre in emission targets for small cars (weighing up to 909 kg) in the latest draft.The government has proposed a flatter curve for each of the five years, beginning FY28, for fleet-wide carbon-di-oxide (CO2) emissions under the Corporate Average Fuel Efficiency (CAFE) III norms.
In its latest draft, which was circulated last evening among carmakers, there is no separate carve out for small cars. In other words, OEMs with a large proportion of smaller, lighter cars in their portfolio will not be allowed higher emissions based on vehicle weight.
According to the latest draft by the Bureau of Energy Efficiency – a copy of which has been seen by ETAuto – the fleet-wide emission targets have been relaxed by about 21 per cent compared to the initial proposal which was shared in September last year.
“Compared to the initial draft which BEE released in September 2025, the emission slope has now been made flatter, which means that against the initial 0.002 value for all five years of CAFE III, the new proposal is 0.00158 for the first year and then reducing annually to reach 0.00131 in the fifth year. BEE’s logic is that the adjustment in the emission slope reduces the CO2 emission target allowance for heavier vehicles, forcing faster adoption of hybrids/EVs, while also providing relief to manufacturers of smaller, lighter cars,” said an industry executive.
The latest proposal has relaxed the targets even further from the revised proposal BEE shared some months back, where the carve out for small cars was removed. There is no mention of the earlier relaxation of 3g/litre in emission targets for small cars (weighing up to 909 kg) in the latest draft.
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Removing the 3g/litre relaxation in emission targets for lighter cars would mean that entry-level cars will still need to cut emissions by about 36 per cent by year five. Basically, the 36 per cent cut in CO2 emissions will apply to all cars regardless of weight.
As per the September 2025 proposal, an entry-level car such as the Alto had to achieve a 47 per cent emission cut but will now need to achieve about 36 per cent anyway.
Another industry executive pointed out that while Japan has model level emission targets, other countries including India (through existing CAFE norms), Europe and the US have fleet-level targets and this is what the new draft also underlines.
The industry and representatives of the ministries of power, heavy industries, road transport & highways are scheduled to meet next week to finalise the latest norms.
Battery electrics win
Another important correction in the latest BEE draft is about super credits allowed for vehicles based on their fuel. Super credits are a form of regulatory adjustment allowing an OEM to count the sale of one low-emission vehicle as multiple vehicles in fleet-average carbon dioxide emission calculation, making it easier for the OEM to meet overall emission targets.
One of the industry executives quoted earlier said that battery electric vehicles have been allowed the maximum super credits at 3, showing government’s “unequivocal” support to these vehicles which have zero tailpipe emissions.
The super credits for strong hybrids have been reduced to 1.6 from 2 proposed earlier. Range Extender Electric Vehicles (REEVs) remain at three super credits. “The ongoing US-Israel-Iran war and fossil fuel issues have probably led the government to reconsider support to BEVs and lessening support to vehicles which use these fuels,” this person said.
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Pooling allowed
The latest BEE draft also specifies the pooling mechanism. This allows OEMs to trade credits in case one falls short of the target for CO2 emissions, thus allowing OEMs with extra credits to benefit.
Also, there is provision for OEMs to buy credits from the BEE itself. The price per g CO2/km of such credits shall be as prescribed for each reporting period: FY28 at ₹2,500; FY29 at ₹3,000; FY30 at ₹3,500; FY31 at ₹4,000 and FY32 at ₹4,500. Of course, penalties have also been prescribed if an OEM fails to meet the annual emission fleet wide target.
The implementation date for CAFE III remains April 1, 2027 but OEMs have said that unless the final notification is published in the next few days, the deadline will be tough to meet.
