The Ministry of Power has issued a revised draft of the Corporate Average Fuel Economy (CAFE) 2027 regulations for passenger vehicles, retaining a credit trading mechanism while introducing additional implementation details for fuel-efficiency standards.

The draft regulations will apply to M1-category passenger vehicles from April 1st, 2027, and public comments have been invited within 21 days before the rules are finalised. According to industry experts, the revised draft relaxes the overall fuel-efficiency targets compared with the earlier version.

The proposed fuel-consumption targets will be progressively tightened, from 3.996 litres/100km (94.76gCO2/km) in 2027-28 to 3.3273 litres/100km (78.90gCO2/km) in 2031-32, according to an official.

Under the proposal, manufacturers that exceed their prescribed fuel-efficiency targets will earn compliance credits, while those that fall short will incur debits.

Companies will be permitted to trade credits with other manufacturers or purchase credits from the Bureau of Energy Efficiency (BEE) to offset any debit balance. The proposed buyout price is Rs. 2,500 (US$ 26) per gram of CO2 per kilometre for the 2028 financial year, increasing progressively to Rs. 4,500 by the 2032 financial year.

The draft also finalises the technical criteria under which manufacturers may claim fuel-efficiency benefits for technologies such as start-stop systems, regenerative braking, tyre pressure monitoring systems, LED lighting, electric water pumps, high-efficiency air-conditioning systems and advanced glazing.

It retains incentives for battery electric vehicles, plug-in hybrid vehicles, strong hybrid vehicles and flex-fuel vehicles through super credits and carbon-neutrality factors, while continuing to assess compliance based on manufacturers' fleet-average fuel consumption.

Manufacturers will be required to report vehicle performance under both the Modified Indian Driving Cycle (MIDC) and the Worldwide Harmonised Light Vehicles Test Procedure (WLTP). The ministry stated that a separate conversion factor between the two test cycles will be notified at a later date.

The revised draft requires credit trading and buyouts to be completed by September 30th of each assessment year, with the final passbook to be submitted by October 31st. It also states that proceeds from the sale of BEE credits, along with penalties collected under the Energy Conservation Act, will be credited to the Central Energy Conservation Fund.