On 16 July 2026 the Ministry of Power published the official CAFE 2027 draft (effective 1 April 2027). The genuinely new provisions are an escalating BEE buyout, bilateral credit trading and a 3 + 2 compliance block. Here is what actually changed - and what didn’t.
The Ministry of Power’s CAFE 2027 draft is now an official, numbered document - not the consultation-stage figures that circulated through 2025 and early 2026. The headline shifts are an escalating buyout now written into the text, credit trading in place of EU-style pooling, and a split compliance block. The table below is the full diff.
| Parameter | Earlier draft / current site | CAFE 2027 draft - 16 July 2026 |
|---|---|---|
| Effective / scope | (assumed FY28, M1) | 1 April 2027, M1 category; 21-day objection window |
| BEE buyout | ₹2,500–4,500 soft band, “not in draft” | Codified & escalating: ₹2,500 / 3,000 / 3,500 / 4,000 / 4,500 (FY28–32) |
| Pooling / trading | EU-style pool of up to 3 OEMs (assessed as one) | No joint pool - bilateral credit trading on mutually agreed terms; results furnished to the designated agency |
| Banking | No cross-year banking (individual OEM) | Credits carry forward within the block; unsettled lapse |
| Block period | Single multi-year block | 3 years (FY28–30) + 2 years (FY31–32) |
| Super-credits | BEV 3.0, SHEV 1.6 | BEV/REEV 3.0 · PHEV & flex-SHEV 2.5 · SHEV 1.6 · flex-ethanol 1.1 |
| Off-cycle | 9 g/km cap | 9 g/km cap via a formal 12-technology menu (1 g each, Table 1.3) |
| Carbon Neutrality Factor | Partly specified | E20+ 8% · flex & flex-SHEV 22.3% · CNG 5% or CBG · diesel per MoPNG |
| Test cycle | MIDC (WLTP TBD) | MIDC now; dual MIDC + WLTP declaration from 1 Apr 2026 |
| Penalty | Section 26 | On block sales after settlement; ΣDebit ÷ (block sales × 23.7135); §26 r/w 27–28; small-volume exempt; 90/10 States/Centre |
What this piece does not cover
The mass-based target formula and the year-by-year curve carry over from the earlier (25 September 2025) draft - this piece focuses on what is genuinely new in the market mechanics. For the full target maths, see the CAFE 2027 mechanics article.
Draft notification, F. No. 10/3/2021-EC, dated 16 July 2026 - open for objections for 21 days; provisions may change before it is finalised.
The single biggest change for compliance planning: the BEE buyout is now codified and escalating, not a soft band. A manufacturer can offset a debit by buying credits from BEE at a price that rises every year.
| Reporting year | BEE buyout (₹ per g CO2/km) |
|---|---|
| FY 2028 | ₹2,500 |
| FY 2029 | ₹3,000 |
| FY 2030 | ₹3,500 |
| FY 2031 | ₹4,000 |
| FY 2032 | ₹4,500 |
Timing is now a cost
A gram left unsettled costs 80% more in FY32 than in FY28. The rising price is deliberate: banking and trading early beats deferring to a late buyout - exactly the band our five-year market model assumed, now specified year by year.
“Pooling” here is credit trading - not EU-style
In the CAFE draft, “pooling” means the bilateral exchange or trade of credits between manufacturers on mutually agreed terms, with the result furnished to the designated agency. There is no EU-style pool - no joint fleet assessed as a single manufacturer, no nominated pool manager, and no cap on counterparties.
Two structural liberalisations flow from this. First, a surplus manufacturer’s credit becomes a genuinely tradable asset it can sell to a manufacturer in debit. Second, credits and debits sit in a passbook and carry forward within the compliance block; any credit left unsettled at block-end lapses. The earlier “up to three manufacturers per pool” construct - where the pool counted as one manufacturer and a nominated manager bore the penalty - is gone.
The block is split 3 + 2
The compliance block is three years from FY2027-28 (FY28–30), then two years from FY2030-31 (FY31–32). Penalty is assessed at the end of each block, on the entire block sales, after credits are settled.
Super-credits are confirmed and extended: BEV / range-extended EV 3.0, PHEV and flex-fuel SHEV 2.5, strong hybrid (SHEV) 1.6, and flex-fuel ethanol 1.1. The effective volume is Ni = vi × ni.
The Carbon Neutrality Factor is now explicit: 8% for E20+ petrol (including SHEV/PHEV), 22.3% for flex-fuel ethanol and flex-SHEV, 5% (or the notified CBG share) for CNG, and the biofuel-blend share for diesel. Off-cycle credit becomes a formal 12-technology menu - start-stop, TPMS, regen braking, 6-speed+, efficient alternator, micro-hybrid, LED lighting, advanced glazing, electric water pump, high-efficiency AC, solar-reflective paint and PWM radiator fan - each worth 1.0 g CO2/km, capped at 9.0 g/km.
The test cycle stays MIDC for now, but manufacturers must declare both MIDC and WLTP CO2 for every model sold from 1 April 2026; the MIDC→WLTP conversion factor will be notified separately once BEE has the data. The trading window is 30 days, to 30 September of each assessment year; the designated agency files the final passbook by 31 October.
Penalty at block-end is Total Debit ÷ (block sales × 23.7135) in litre/100 km, under Section 26 read with Sections 27–28 of the EC Act. Small-volume manufacturers are exempt from the specific target; buyout receipts and penalties split 90% to the States and 10% to the Centre.
Our view
Three things matter for an OEM planning today. The escalating buyout turns timing into money - bank and trade early. Credit trading (not EU-style pooling) makes a surplus credit a real, sellable asset. And the 3 + 2 block with lapse-at-end means the settlement clock, not the annual test, is what to model against. It is still a draft - but the mechanics are finally specific enough to plan on.
Primary regulatory source and Climate Decode analysis cited above.
From the escalating buyout to credit-trade counterparties and the 3 + 2 block, TerraNova helps Indian PV OEMs cost every settlement path with finance-grade clarity.