Centre Cuts CAFE II Fines to ₹2,728 Crore for 9 Carmakers After Recalculation

Fines totalling ₹2,728 crore have been levied against nine car makers that missed India's Corporate Average Fuel Efficiency (CAFE II) targets across three consecutive financial years -- FY23 to FY25 -- according to a presentation made by the Ministry of Power to the Prime Minister's Office last week. The revised figure marks a steep reduction from an earlier estimate of around ₹7,800 crore, Times of India has reported.

The previous penalty structure charged manufacturers a base rate of ₹10 lakh per company, plus ₹25,000 per vehicle produced where the shortfall fell below 0.2 litres per 100km, rising to ₹50,000 per unit where the breach exceeded that threshold. Under the revised methodology, a flat penalty of ₹37.5 lakh has been set as the standard charge for all OEMs covering the April-to-December period of FY23. This is a change that accounts for the substantial reduction in the overall sum.

According to sources familiar with the matter, as per the report, the ministry's presentation also confirmed that a credit-debit registry will be set up and maintained by the designated authority for each OEM. Officials said the registry is intended to sharpen enforcement and bring greater transparency to the system, at a time when the government is working towards finalising CAFE III regulations.

Under the framework outlined in the presentation, any surplus credits built up by a manufacturer can be carried within the same compliance block, initially covering a three-year window, followed by a two-year window within the five-year implementation cycle. OEMs running a credit deficit will be permitted to purchase surplus credits from manufacturers that have exceeded their targets.

The PMO had previously instructed the ministries of power and road transport to establish an unambiguous mechanism for recovering penalties from non-compliant carmakers. 

CAFE II remains in force from FY23 to FY27, with CAFE III set to take effect from FY28 through to FY32. The PMO has also asked the relevant departments to reach a consensus on CAFE III norms before a final proposal is put to the Prime Minister for approval.