AIDA calls for balanced CAFE-III norms to boost ethanol mobility in India

The Automotive Industry Development Association (AIDA) has called on the Indian government to adopt a balanced and technology-neutral approach in the draft Corporate Average Fuel Consumption (CAFE-III) norms for FY 2027–28 to FY 2031–32. AIDA seeks stronger incentives for ethanol-based decarbonization pathways, warning that an electric vehicle (EV)-heavy framework could misalign with India’s expanding ethanol production capacity.

Key Highlights

• AIDA urges balanced CAFE-III norms for FY 2027–28 to FY 2031–32
• Industry body seeks higher incentives for ethanol-based flex-fuel vehicles
• Government prepares to introduce E85 fuel with new dispensing requirements
• Nationwide rollout of E20 fuel completed in April 2026

Concerns Over Current CAFE-III Draft

In a letter dated April 22, 2026, addressed to Neeraj Mittal, Secretary, Ministry of Petroleum & Natural Gas, AIDA expressed concern that the current draft framework is strategically imbalanced. The draft strongly incentivizes battery electric vehicles (BEVs) and plug-in hybrid vehicles through higher volume derogation factors. However, AIDA argued that ethanol-based mobility solutions remain under-recognized despite their role in emissions reduction, energy security, and rural economic development.

AIDA specifically objected to the proposed Volume Derogation Factor (VDF) of 1.1 for standalone flex-fuel vehicles (FFVs). The association stated that this figure does not reflect the benefits of ethanol-based solutions in reducing dependence on imported crude oil and supporting India’s bioenergy ecosystem. AIDA recommended revising the VDF for standalone FFVs to a range of 2.0–2.5.

Recommendations and Policy Alignment

AIDA urged policymakers to create a diversified compliance framework that co-incentivizes electrification, hybridization, and ethanol pathways. The association also called for the inclusion of lifecycle or well-to-wheel emissions benefits of domestically produced ethanol fuels in the CAFE-III structure. AIDA emphasized the need to align the CAFE-III norms with the national ethanol roadmap beyond E20, cautioning that an EV-heavy policy could undermine recent investments in ethanol production.

The letter comes as the government prepares to advance its ethanol blending initiatives. A senior government official stated that there is a draft notification to allow E85 fuel. The official noted that market consensus has been reached and preliminary vehicle testing is complete. However, E85 will require a separate dispensing mechanism at petrol pumps and vehicles specifically designed for this blend, as it cannot be used in standard engines. The official added that E85 could become mandatory in the coming years, though no formal timeline has been set.

India recently completed a nationwide rollout of E20 fuel from April 1, requiring oil marketing companies to sell petrol blended with up to 20 percent ethanol. AIDA maintains that a multi-fuel approach will help India reduce emissions, strengthen energy independence, and provide benefits across the agricultural sector.

Also Read: ISMA Calls for reinstating flex-fuel benefits in upcoming CAFE-3 Norms

CarBike 360 Says

​As India transitions toward cleaner mobility, striking the right balance in CAFE-III norms will be crucial. AIDA’s push reflects the industry’s need for practical regulations that support ethanol adoption without disrupting market dynamics. A well-calibrated approach can accelerate flex-fuel vehicles, reduce emissions, and ensure that both automakers and consumers benefit from a smoother, more sustainable shift.