The Power Ministry has notified CAFE-III fuel economy norms, running from April 1, 2027 to March 31, 2032. CAFE stands for Corporate Average Fuel Efficiency, and the rules work on fleet averages, not individual models. Here is what changes.

How it works: each carmaker's average fuel use across all cars sold must fall within the target. The target tightens from 3.996 litres per 100 km to 3.3273 litres per 100 km by 2031-32. In carbon terms, that is 113.1 grams of CO2 per kilometre falling to 91.7 grams.

Super-credits give cleaner cars extra weight. Battery electric and range-extended vehicles count three times, plug-in and strong hybrids count 2.5 times, and flex-fuel vehicles 1.1 times. Carmakers that beat their targets can sell credits to those that miss them, with trading run by the Bureau of Energy Efficiency.

Small cars? Maruti Suzuki sought a concession for entry-level models, arguing the targets would make affordable cars costlier. The government refused. CAFE-III has no small-car relief.

What does it mean for buyers? Expect more hybrids and electrics in mainstream lineups as makers chase credits. Industry body SIAM welcomed the five-year roadmap. Small petrol cars may get relatively costlier as compliance costs rise.