Former CEO of NITI Aayog Amitabh Kant sharply criticized the Corporate Average Fuel Economy (CAFE-3) norms, calling them an 'enormous missed opportunity,' which he believes are 'at best status-quoist and at worst regressive.'
Speaking on social media platform X, Kant stated that the new standards represented a chance for India to achieve a technological leap similar to that seen with UPI and smartphones. However, according to him, instead, an enormous missed opportunity occurred. He emphasized that the new CAFE norms are either regressive or merely maintain the status quo because they lack vision and a clear future plan, and regulation follows the industry rather than guiding it. Kant noted that electric vehicles should be the ultimate goal, not just one of many options.
The Ministry of Energy announced the introduction of CAFE-3 norms on Tuesday evening. These norms establish new requirements for fuel efficiency and carbon dioxide (CO2) emissions for passenger cars from April 1, 2027, to March 31, 2032.
India cannot secure its mobility future by protecting its past: Kant
Kant argued that India will not succeed in the mobility sector by maintaining old approaches, citing the country's dependence on oil imports. He reminded that the country imports nearly 90% of its oil and is actively developing battery and electric vehicle manufacturing capacities. In his view, fuel efficiency rules should incentivize the industry to move towards this future, rather than allowing it to postpone changes.
He also commented on the target for electric vehicle adoption under the new norms, noting that they aim for 11 percent of electric vehicles by 2032, whereas in the current fiscal year, the share of EV sales is already approaching 8 percent. Criticizing the Bureau of Energy Efficiency (BEE), Kant stated: 'How can it sell credits? The regulator cannot be a market player in what it regulates. This was a moment to jump up. We missed it due to a regressive regulator.'
This is not the first time Kant has criticized CAFE norms. Before the official notification of CAFE-3 standards, he repeatedly spoke out against projects released by the Bureau of Energy Efficiency.
Exemption for small cars removed
The rules apply to M1 category vehicles, which cover passenger cars such as hatchbacks, sedans, SUVs, and MPVs seating up to eight passengers besides the driver. One of the most significant changes is the removal of a separate CAFE exemption for small gasoline cars weighing up to 909 kg. Previously, such an exemption was requested by Maruti Suzuki India, while Tata Motors, JSW MG Motor, and other automakers opposed it. The September 2025 proposal included a reduction of the CO2 emission rate by 3 g/km for gasoline cars weighing up to 909 kg, but the final rules excluded this separate benefit.
Vehicle weight will influence CAFE targets
CAFE targets are calculated for each manufacturer based on the weighted average mass of their new vehicles. In the final rules, the reference weight is set at 1229 kg. The annual weight multiplier will decrease from 0.00158 in fiscal year 28 to 0.00131 in fiscal year 32. For automakers, this may affect the choice of vehicle weight, engine efficiency, powertrains, and the range of models sold.
Electric vehicles retain compliance advantage
Another important feature of CAFE-3 is the supercredit mechanism, which grants manufacturers additional compliance value for selling more environmentally friendly vehicles. According to the final rules, one Battery Electric Vehicle (BEV) will count as three vehicles when calculating the manufacturer's fleet metrics. The same 3x coefficient applies to Range Extended Electric Vehicles (REEVs). The higher this coefficient, the easier it is for the automaker to meet the emission target. For plug-in hybrids and strong hybrids running on flexible fuel, the coefficient is 2.5x. Strong hybrids receive a coefficient of 1.6x, and flexible fuel vehicles receive 1.1x. Any fuel mixture containing at least 85 percent ethanol is called flexible fuel. The final structure differs significantly from the initial proposal. The June 2024 proposal offered a 4x coefficient for BEV, 2x for PHEV, 1.2x for strong hybrids, and 5x for hydrogen fuel cells. Hydrogen fuel cells are not featured in the final supercredit table.
Credit and debit system introduced
CAFE-3 also introduces a credit and debit system. Manufacturers who perform better than the targets receive credits, while those who lag accumulate debits. These entries are maintained in a manufacturer-level ledger. Credits can be transferred within a compliance block. The first compliance block covers fiscal years 28–30, and the second covers fiscal years 31–32. Unsettled credits expire at the end of the respective block. Automakers can also trade credits with other manufacturers. A manufacturer with a deficit can purchase credits from the Bureau of Energy Efficiency. The price starts at 2500 rupees per g CO2/km in fiscal year 28 and increases to 4500 rupees in fiscal year 32. Credit trading and purchase will be permitted annually from October 1 to October 31.