Draft CAFE-III Framework Proposes Rewards for Using Efficient Auto Tech

The draft CAFE-III framework offers automakers emission credits up to 9 gCO₂/km for integrating energy-saving tech, while introducing Carbon Neutrality Factors to reward biofuel and multi-fuel vehicle adoption.

Under the newly proposed CAFE-III framework (issued July 17, 2026), car manufacturers are rewarded with specific regulatory credits and incentives for using certified energy-saving technologies in their vehicles.

Under the draft framework issued by the Ministry of Power, carmakers can claim an emissions reduction benefit of up to 9 gCO₂/km across their fleet for using approved energy-saving features. This framework rewards fuel-saving tech through specific incentives, compliance structures, and targeted technology allowances.

Approved Technologies and Their Benefits

There a compliance reward of 1 g CO₂/km for deploying each of these technologies in a vehicle:

• Automatic Start-Stop Systems 
• Regenerative Braking 
• Tyre Pressure Monitoring Systems (TPMS)
• 6-Speed or Higher Transmissions
• High-Efficiency Alternators & Motor Generators
• LED Exterior Lighting 
• Electric Water Pumps 
• Advanced Glazing & Solar-Reflective Paint
• High-Efficiency Air-Conditioning Systems

The integration of energy-efficient electrical components, such as LED exterior lighting, plays a direct role in reducing a vehicle's carbon footprint by optimising power consumption. Traditional halogen or HID bulbs draw a lot of current from the vehicle's electrical system, which places a heavy continuous load on the engine-driven alternator. By switching to LED systems, automakers cut lighting power consumption by up to 80%. This drastic drop in electrical demand reduces the mechanical resistance the alternator exerts on the engine, thereby lowering fuel consumption and preventing unnecessary tailpipe emissions during everyday driving.

Then, maintaining optimal physical contact with the road is another crucial factor, which is why Tyre Pressure Monitoring Systems (TPMS) are highly valued under the new draft regulations. When tyres drop below their recommended pressure levels, the rubber deforms, creating a larger contact patch that spikes rolling resistance. The engine is then forced to work much harder and burn more fuel just to maintain a steady speed. A Tyre Pressure Monitoring System prevents this hidden inefficiency by providing real-time alerts to the driver.

Cumulative Compliance Caps

Under the draft Corporate Average Fuel Efficiency Phase Three framework, each of these individual technological interventions acts as a standalone compliance lever. To ensure manufacturers continue focusing on core powertrain modernisation, the policy sets a strict cumulative cap, meaning a carmaker can stack these mechanical and electrical rewards up to a maximum fleet average concession of 9 gCO₂/km.

Introduction of Carbon Neutrality Factors (CNFs)

Furthermore, the new CAFE-III framework has introduced Carbon Neutrality Factors (CNFs) to incentivise the adoption of multi-fuel and biofuel technologies that lower fossil fuel dependence. Automakers can secure specific deductions on their officially declared tailpipe emission values depending on the fuel type. Regular petrol vehicles compatible with the standard E20 blend receive an 8% emission reduction, while dedicated ethanol flex-fuel and strong hybrid flex-fuel systems enjoy a substantial 22.3% discount.

Additionally, Compressed Bio-Gas (CBG) and CNG vehicles are granted a baseline emission reduction of at least 5%, which can scale higher based on verified fuel blending levels.

Also read: Gadkari Says No Verified Complaints Against E20 Petrol, But Owners Report Mileage Drop and Damage