If you’re eyeing a new car in 2027, the first thing you’ll notice is the new fuel‑efficiency ceiling: manufacturers now have to keep average consumption below 2.8 L/100km in FY 2027‑28, dropping to 1.3 L/100km by FY 2031‑32. That’s a 0.5‑L/100km reduction over five years, a hard‑hit that nudges automakers toward electrification, stronger hybrids, or clever tech upgrades.
To meet those numbers, the Ministry has introduced a credit‑trading system. Every manufacturer gets a passbook; if a model beats its target, the surplus becomes a credit, and if it falls short, it’s a debit. Credits can be sold or bought from the Bureau of Energy Efficiency, with prices climbing from Rs 2,500 per g CO₂/km in 2027‑28 to Rs 4,500 by 2031‑32, but trades are only open in a 30‑day window each October.
Clean‑tech vehicles get a boost through “super credits”. Battery‑electric and range‑extended EVs enjoy a 3.0 multiplier, plug‑in hybrids a 2.5, strong hybrids a 1.6, and flex‑fuel ethanol cars a 1.1. In practice, that translates to extra credits for every 1 L/100km the vehicle saves, making EVs even more attractive for manufacturers.
There’s also a carbon‑neutrality factor that discounts CO₂ for certain fuels: ethanol‑blended petrol sees an 8% cut, flex‑ethanol a 22.3% cut, and CNG a 5% cut. These discounts lower the effective emissions figure, which in turn can reduce the credit debit a manufacturer owes.
Finally, a list of technology credits caps at 9 g CO₂/km (≈0.38 L/100km). Eligible techs include start‑stop, tyre‑pressure monitoring, regenerative braking, 12V/48V alternators, LED lighting, and solar‑reflective paint. Each eligible piece earns 1 g CO₂/km, so a car with six of them can claim up to 6 g CO₂/km in credits.
For buyers, the net effect will be a push toward cleaner small cars and a higher price premium on conventional models that lack the credits to offset the stricter targets. Automakers will need to make the trade‑off between adding costly tech and keeping prices competitive. The first compliance block kicks off in FY 2027‑28, with full enforcement by March 31, 2032, giving manufacturers a five‑year runway to adjust.