Government drafts rules to penalise carmakers flouting emission norms

New Delhi: Carmakers flouting emission norms may soon face hefty penalties, with the government notifying draft rules empowering the Bureau of Energy Efficiency (BEE) to oversee compliance and impose fines.

Under the proposed Energy Conservation (Compliance Enforcement) Rules, 2025, BEE will enforce adherence to Corporate Average Fuel Efficiency (CAFE) norms and levy penalties proportional to the shortfall in targets, the government said in its notice.

At present, there is no procedural framework to penalise automakers that miss CAFE targets, even though the Energy Conservation (Amendment) Act, 2022, allows for such action.


The government is now framing guidelines for the third edition of CAFE norms, which are set to take effect from April 2027.

“In order to avoid the difficulties of imposing penalty, it has become necessary or expedient to empower the bureau to detect, verify, assess and represent non-compliance cases before the adjudicating officer appointed by the state commission,” the power ministry said in the draft notification issued on Monday.

In case of disputes, the electricity regulatory commission (SERC) of the state where the registered office of a carmaker or importer is located will adjudicate the claims and pass an order on final penalties, the notification explained.

The penalties will be credited into the Central Energy Conservation Fund (CECF).

Of the penalties, 90% will be transferred to states.

“As much as 90% of collected penalties will be distributed to states based on the sales share of the non-compliant vehicle model in that state,” a senior industry official said. “Only 10% will remain with the central government.”

As per an assessment done by the Centre, eight carmakers including Kia, Renault and Mahindra & Mahindra (M&M) had higher than mandated emission levels in FY23, which could mean penalties of around Rs 7,300 crore.

These companies had vehicles whose fuel consumption exceeded 4.78 litres per 100 km and had carbon dioxide emissions of more than 113 grams per km.

The quantum of penalties though had become a point of contention between the Centre and automakers.

Carmakers had argued that the new and stricter penalty norms came into effect only from January 1, 2023, and therefore calculating penalties based on cars sold in the entire financial year 2022-23 would not be appropriate.