Apex Sugar Industry Body Urges Centre to Restore Flex Fuel Vehicle Incentives in Draft CAFE III Norms

The country's apex sugar and bio-energy industry body has written to the Ministry of Power urging it to restore stronger incentives for flex fuel vehicles under the draft Corporate Average Fuel Efficiency norms, warning that a weaker incentive structure could slow the automotive industry's shift towards ethanol-compatible vehicles. The Indian Sugar and Bio-Energy Manufacturers Association (ISMA), which represents private and public sector sugar mills and bio-energy producers, said it welcomed the Centre's broader support for ethanol-based transport but raised concern over a reduction in the Volume Derogation Factor, a key incentive parameter, in the latest version of the draft CAFE III regulations, says a report by Business Standard. 

The association argued that diluting this provision risks discouraging vehicle manufacturers from stepping up flex fuel vehicle production.

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India reached its 20 per cent ethanol blending target ahead of schedule, a milestone underpinned by sustained policy support and significant capital investment from sugar mills and grain-based distilleries. 

ISMA said that with ethanol production capacity now comfortably outstripping current blending requirements, expanding the flex fuel vehicle market offers the most direct route to absorbing the surplus while supporting rural incomes and ensuring timely payments to farmers.

The body also pointed to ethanol's strategic value in reducing India's reliance on imported crude oil, arguing that a robust flex fuel vehicle ecosystem would help insulate the country from disruptions in global energy markets driven by geopolitical instability. The ethanol programme, it noted, has already delivered measurable gains in foreign exchange savings.

Among its specific recommendations, ISMA called for the reinstatement of earlier incentive levels under both the Carbon Neutrality Factor and Volume Derogation Factor provisions. It also proposed that the regulatory framework be broadened to include emerging vehicle technologies such as flex fuel plug-in hybrid electric vehicles and flex fuel range-extended electric vehicles, to ensure the norms remain relevant over the longer term.

The Ministry of Power has not issued a public response to ISMA's letter. 

The CAFE III norms, which set fuel efficiency standards for passenger vehicles in India, remain in draft form and are subject to stakeholder consultation ahead of final notification.