Govt mulls cash boost for fuel-efficient auto firms

Tata Motors PV, Maruti Suzuki could be Tesla-like beneficiaries of credit trading

- Ayaan Kartik & Mansi Pimpalkhare

The government is weighing a proposal to reward carmakers that have exceeded India’s fuel-efficiency requirements since financial year 2023 by allowing them to sell surplus compliance credits to peers who missed their targets.

This could create a new revenue opportunity for firms such as Tata Motors Passenger Vehicles and Maruti Suzuki, who have met their targets over the past few years.

A 19 May draft notification by the power ministry, reviewed by Mint, proposes a ‘credit-debit passbook system’, under which manufacturers that exceeded their Corporate Average Fuel Efficiency (CAFE) Phase II targets between FY23 and FY27 can sell surplus compliance credits to their lagging peers.

The plan mirrors the emissions credit markets in Europe, the US and China, where automakers trade compliance credits. Between 2017 and 2025, Tesla reportedly earned over $10 billion by selling these credits to legacy firms that struggled to meet stringent norms.

Simply put, under the plan, an automaker would maintain a compliance passbook for each fiscal under the CAFE 2 regime. A positive credit balance would indicate that a company’s average fleet emissions are below the prescribed cap, while a debit would mean emissions crossed the threshold. Automakers must maintain a net positive balance to avoid penalties. Breaching the norms can attract a penalty of ₹25,000-50,000 per non-compliant vehicle sold, in addition to a base fine of ₹10 lakh.