India's CAFE III draft tightens fuel-efficiency norms for passenger vehicles from 2027

India's Ministry of Power has released the draft CAFE III regulations, which set stricter fuel-consumption standards for passenger vehicles from 2027-28 to 2031-32. The rules aim to cut CO2 emissions by pushing automakers to improve average fleet efficiency through better engines, lighter designs, hybrids, or electric vehicles. A market-based compliance system lets manufacturers trade credits, and a digital passbook tracks performance. The draft is open for public consultation before finalization. Unlike Bharat Stage norms that target individual vehicle pollutants, CAFE focuses on the average fuel efficiency of each automaker's entire portfolio. The new framework gives extra weight to battery electric vehicles and plug-in hybrids, and plans a gradual switch to the Worldwide Harmonized Light Vehicles Test Procedure for more accurate real-world data. Lighter vehicle fleets face less stringent targets, while heavier fleets face more pressure. This could accelerate EV adoption and grid decarbonization in India's auto sector.