Corporate average fuel efficiency (CAFE) norms

• From 1 April, India adopts CAFE, or corporate average fuel efficiency, norms.

About CAFÉ norms:

• CAFC regulations were proposed by the Ministry of Power of the Govt. of India, in collaboration with the Bureau of Energy Efficiency, to set the fuel consumption targets for every automaker in the country from 2017 fiscal year onwards
• These standards aim to improve the fuel efficiency of the automobiles in the wake of rising costs of importing oil.
• So far, many of the advanced (USA, EU), as well as, developing nations (China, Mexico) have introduced such regulations to encourage efficient consumption of fuel. .
• These norms require cars to be 30% or more fuel efficient from 2022 and 10% or more between 2017 and 2021.
• The mileage improvement will be decided on the basis of litres of fuel consumed by a vehicle to run 100km.
• The move is targeted at reducing the carbon footprint of the automobile industry. It is the first time such norms have been introduced in India.

Analysis:

• There is low emission in India and the biggest cause is the weight of the vehicle. India had the lightest vehicle fleet, weighing around 950kgs. Light cars mean low emissions.
• India still has a tax break for sub-4m cars, which leads to a huge price advantage to smaller cars, encouraging manufacturing and sales of smaller and compact cars.
• Car makers were hoping that since diesel as a fuel offers higher mileage, they will be able to meet those norms but since the said fuel has come under scanner especially after the Supreme Court effected a ban on diesel run vehicles in 2015, the larger fear is that usage of diesel may just be limited to commercial use.
• Also, meeting CAFE norms will be impossible just by petrol vehicles since their mileage is low and weight is almost the same. Therefore, the way forward will be hybrids—not the mild ones.
• This move will be a challenge for Indian cars market leaders which are finding it difficult to invest rapidly in changing technologies . with global leaders, In this scenario, Toyota and Honda are the global leaders and Indian market leaders, including Suzuki, are laggards.
• Like Maruti had to withdraw its Omni and Gypsy models in 2000 when Bharat stage norms were first introduced as Suzuki did not have tech immediately available in India to meet those norms. Models were brought back to the market after upgradation.

By: Vishal