India scrapped a planned concession for small cars in upcoming fuel-efficiency rules after automakers including Tata Motors Ltd. and Mahindra & Mahindra Ltd. argued that it would benefit only one company—Maruti Suzuki India Ltd., a government document shows.
The September 2025 draft of Corporate Average Fuel Efficiency-III, or CAFE-III, norms proposed leniency for petrol cars weighing 909 kg or less – which is widely seen to favor Maruti Suzuki, which controls 95% of India’s small car market. India’s energy ministry has now removed that exemption and tightened other standards, according to the latest 41-page draft reviewed by Reuters, increasing pressure on all automakers to increase sales of electric and hybrid cars.
The document states that the new CAFE-III norms impose curb over-compensation for vehicle weight, are intended to level the playing field between light and heavy fleet manufacturers, and are designed to deliver real-world efficiency gains. They offer a “pathway to substantially faster reductions” in emissions.
The power ministry did not respond to a request for comment.
CAFE-III Criteria – In favor of EV, hybrid?
Transport accounts for about 12% of India’s energy use and is a major driver of petroleum imports and carbon emissions. The document states that passenger vehicles make up about 90% of transportation-related emissions.
CAFE-III norms determine the permissible CO2 emissions in a manufacturer’s fleet of passenger cars weighing less than 3,500 kg. Updated every five years, they push automakers toward clean technology, including electrification, compressed natural gas and flex-fuels.
The new rules will be in place for five years from April 2027 and are central to auto makers’ product and powertrain investment plans. It was not immediately clear when the rules would be finalized.
The September draft would have allowed fuel-consumption targets to rise sharply with vehicle weight, easing compliance for makers of heavy cars like M&M, Tata Motors and Volkswagen, while tightening demand for players with light fleets like Maruti. That imbalance inspired the carving. The modified scheme reduces the range to make target acquisition more comfortable for heavier vehicles.
“Manufacturers with heavy fleets … need to achieve strong internal efficiency improvements,” the document says.
A credit system would reward companies that sell more EVs and plug-in hybrids, and pooling of fuel-consumption performance between companies would be allowed. Failure to comply will result in fines of up to $550 per car.
The revised plan aims to reduce average fleet emissions from 114 g/km to around 100 g/km over five years by March 2032. With credits, this could fall to 76 g/km if electric models reach 11% of total car sales by 2032.
