H D Kumaraswamy, Minister of Heavy Industries and Steel, said that the power ministry has forwarded a proposal on the Corporate Average Fuel Efficiency III norms to the Prime Minister's Office after a meeting with stakeholders organised by the Federation of Indian Chambers of Commerce and Industry. He indicated that the submission followed consultations with industry participants and government officials. The minister did not specify which draft was sent to the Prime Minister's Office.

The Corporate Average Fuel Efficiency regime, first introduced in 2017, sets limits on average fuel consumption and carbon dioxide (CO2) emissions across a manufacturer's fleet with the aim of improving fuel efficiency and reducing emissions. The second phase began in 2022 and the next phase, CAFE III, is scheduled to commence from April 2027. The draft released in September 2025 prompted extensive industry feedback, particularly on the treatment of smaller cars.

The most recent draft would require fleet wide CO2 emissions to be lowered to 91.7 grams per kilometre. It proposes a CO2 allowance of three grams per kilometre for each reporting year for vehicles weighing less than 909 kilogram (kg), with engines up to 1200 cc and measuring under four metres, capped at nine grams per kilometre in total. Debate centres on whether the concession should apply only to cars under the 909 kg threshold or extend to all cars up to 1170 kg, which some manufacturers call the industry average. Officials say the concession is designed to target the smallest segment while protecting overall emissions goals.

Tata Motors Passenger Vehicles Ltd argued that leniency for smaller cars would compromise safety and detract from sustainable mobility efforts. Maruti Suzuki India said concessions should cover a larger segment and cited a 95 per cent share of the sub 909 kg market. The PMO submission followed FICCI facilitated talks and will be examined ahead of April 2027.