Whalesbook
Penalty Reduction and Revised Calculation
The financial burden on nine major car manufacturers for non-compliance with Corporate Average Fuel Efficiency (CAFE-2) standards has been substantially lowered. The revised penalty now stands at ₹2,728 crore, a sharp decrease from the earlier estimated ₹7,800 crore for the period spanning fiscal years 2023 to 2025. This adjustment stems from a new calculation method, which now fixes a standard penalty of ₹37.5 lakh for all original equipment manufacturers (OEMs) for April-December of FY23. This represents a significant shift from previous calculations that involved per-car charges based on the degree of non-compliance.
Credit Registry and Pooling Mechanism
The Ministry of Power is establishing a credit-debit registry for each OEM, a plan outlined in a presentation to the Prime Minister's Office (PMO). This registry will track compliance and non-compliance more effectively. Furthermore, manufacturers will now have more flexibility with surplus credits generated within a compliance block period – initially three years, then two years within the five-year implementation cycle. These surplus credits can be pooled. OEMs facing a deficit can procure necessary credits from manufacturers holding surpluses, mitigating the risk of substantial penalties if they still remain in deficit.
Future Norms and Regulatory Oversight
The CAFE-2 norms are currently in effect from FY23 to FY27, with the subsequent phase, CAFE-3, scheduled from FY28 to FY32. The government's move to refine the penalty structure and implement a credit registry signals a concerted effort to encourage adherence to fuel efficiency standards while providing a more manageable compliance pathway. The PMO's prior directive to the power and road ministries underscored the need for a clear penalty recovery mechanism, which this revision addresses. The finalization of CAFE-3 norms is also underway, indicating a continuous focus on improving vehicular fuel efficiency in India.