Page 67 - Policy Economic Report - September 2026

POLICY AND ECONOMIC
OIL & GAS MARKET

India’s energy security and sustainability objectives. The framework is aligned with the broader vision
articulated by Prime Minister Shri Narendra Modi for clean, energy-efficient and sustainable mobility
as an important pillar of India’s development and energy security.

Key Features of the new CAFE Norms

1. The overall fleet-average target has been progressively strengthened compared with the
existing targets, while simultaneously providing manufacturers with a range of incentives and
compliance pathways to encourage the adoption of clean fuels, cleaner technologies and
more efficient vehicles. The framework therefore combines higher ambition with greater
flexibility for industry to determine the most appropriate technology pathways.

2. The framework recognises the contribution of renewable and low-carbon fuels, including
ethanol-blended petrol, biofuels and CBG, through the introduction of the Carbon Neutrality
Factor (CNF). This provides manufacturers with an additional pathway for improving their
fleet-level CAFE performance, alongside vehicle efficiency improvements and electrification.
The provision supports India's broader transition towards cleaner fuels while encouraging
innovation across multiple technology pathways.

3. The list of recognised fuel-conservation technologies has been significantly expanded from
four to twelve technologies. This provides manufacturers with greater flexibility to adopt and
receive recognition for approved fuel-saving technologies. A concession of 1 g CO2/km for
each eligible technology, subject to a maximum of 9.0 g CO2/km, is available under the
framework.

4. Battery Electric Vehicles (BEVs), Range-Extended Electric Vehicles (REEVs), Plug-in Hybrid
Electric Vehicles (PHEVs), Strong Hybrid Electric Vehicles(SHEV) and Flex-Fuel Vehicles will
receive volume derogation factors, also known as ‘super credits’, in fleet-average calculations.
This provides an additional incentive for manufacturers to accelerate the deployment and
market penetration of cleaner and advanced vehicle technologies.

5. To facilitate ease of compliance and provide manufacturers with greater operational
flexibility, manufacturers may opt to meet their obligations over specified two-year/three-
year compliance blocks, as provided under the framework. This allows manufacturers greater
flexibility in managing their technology transition and product portfolios over the compliance
period.

6. The framework provides greater flexibility to manufacturers in meeting their CAFE
obligations. Manufacturers that perform better than their prescribed targets will generate
credits, which may be carried forward within the specified compliance blocks. Manufacturers
with a compliance gap may utilise eligible carry-forward provisions, enter into exchange/trade
of credits with other manufacturers, or purchase credits through the buyout mechanism

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