India's New CAFE-3 Norms Face Sharp Criticism: A Missed Opportunity?

The automotive industry in India, and indeed environmental observers, are buzzing following the Ministry of Power's recent notification of the Corporate Average Fuel Economy (CAFE-3) norms. These new standards, set to kick in from April 1, 2027, and run through March 31, 2032, aim to push passenger vehicles towards greater fuel efficiency and lower carbon dioxide (CO2) emissions. Sounds progressive, right? Well, not everyone thinks so. In fact, a prominent voice, former NITI Aayog CEO Amitabh Kant, has come out swinging, openly criticizing the new regulations as a "huge missed opportunity" and unequivocally "backward looking."

So, what exactly has caused such a stir? Let's dive into the specifics. The CAFE-3 norms introduce stricter requirements for how much fuel cars consume and, consequently, how much CO2 they emit. A key feature, and one that initially seems positive, is the introduction of ‘EV super credits.’ Essentially, this means that for automakers, every Battery Electric Vehicle (BEV) they sell is counted as three vehicles when calculating their overall compliance. This mechanism is clearly designed to incentivize the production and adoption of electric vehicles, which, you know, makes a lot of sense given global climate goals.

However, not all changes are being universally welcomed. One significant alteration is the removal of a long-standing concession for small petrol cars weighing up to 909 kg. This particular benefit had been a point of contention for some time, with industry players like Maruti Suzuki India advocating for its retention, while others such as Tata Motors and JSW MG Motor had reportedly opposed it, arguing for a level playing field. The new targets themselves are quite technical, calculated based on the weighted average unladen weight of new vehicles, using a reference weight of 1,229 kg.

Perhaps the most contentious aspect, and the one drawing the sharpest ire from Mr. Kant, is the intricate credit-debit system embedded within CAFE-3. Carmakers now have the ability to earn credits if they surpass the fuel efficiency targets, carry those credits forward, or even trade them with other manufacturers. And if they fall short? They can buy credits – specifically from the Bureau of Energy Efficiency (BEE), the very body tasked with overseeing these norms. This trading window, for what it’s worth, is set to open annually from October 1 to October 31.

This is precisely where Amitabh Kant finds the system fundamentally flawed. He articulated his frustration quite clearly: "A regulator shouldn't be a player in the market it regulates." It's a classic conflict-of-interest argument, isn't it? The BEE, in his view, shouldn't be profiting from selling credits, especially when those prices are slated to increase quite dramatically. For instance, buying credits from BEE will cost ₹2,500 per gram of CO2 per kilometer in the first compliance block (FY28-FY30), jumping to ₹4,500 by the second block (FY31-FY32). This setup, according to Kant, undermines the very spirit of robust, independent regulation.

The journey to these CAFE-3 norms has been a winding one, with various draft proposals surfacing over the past couple of years. We saw discussions around the small car concession back in September 2025, and then proposals concerning super-credit factors in June 2024. These timelines, incidentally, give us a glimpse into the extensive deliberation that often precedes such major policy changes, even if the final outcome isn't to everyone's liking.

So, as the industry gears up for these new regulations, the debate ignited by Amitabh Kant underscores a critical tension. On one hand, there's a clear imperative for cleaner, more efficient vehicles. On the other, concerns linger about the efficacy and fairness of the regulatory framework itself. Whether CAFE-3 will truly steer India's automotive sector towards a greener, more competitive future, or simply prove to be the "backward looking" missed opportunity Kant describes, remains to be seen. One thing is certain, though: the conversation around these norms is far from over.