The Corporate Average Fuel Efficiency (CAFE-III) is a set of government-mandated standards that function as a regulatory scheme in India, established by the Bureau of Energy Efficiency (BEE) under the Ministry of Power. The CAFE norms were first introduced in India as CAFE-I in 2017, with the primary objective of reducing the nation's heavy reliance on crude oil imports and lowering vehicular CO₂ emissions to align with India's climate goals, including achieving net zero emissions by 2070.
The CAFE-III phase is scheduled for implementation from April 1, 2027, and will run through March 31, 2032, applying to M1 category passenger vehicles (up to nine seats and under 3,500kg). It works by regulating the weighted average fuel consumption and CO₂ emissions of an automaker's entire fleet, rather than individual models, a mechanism distinct from tailpipe standards like the BS-VI norms. The key provision is the imposition of stricter targets, requiring manufacturers to reduce their average fleet CO₂ emissions from approximately 113 g/km (at the end of CAFE-II) to 78.9 g/km by FY32.
To achieve this, the scheme includes a Super Credit Scheme that incentivizes green technology: a Battery EV (BEV) sale, for instance, counts with a 3.0 multiplier towards the fleet average. Furthermore, a Carbon Credit Trading System allows manufacturers exceeding their targets to sell surplus credits to those falling short, promoting a market-based compliance mechanism. The entire framework is implemented under the Energy Conservation Act, 2001. A recent change in the draft norms involved the removal of a proposed 3g/km relief for certain small petrol cars, favoring a flatter, more stringent compliance curve for all manufacturers.