- ISMA warns weaker incentives in CAFE-3 could slow flex fuel vehicle adoption and ethanol utilization.
- Restoring policy support is critical to absorb ethanol surplus and strengthen India’s energy security.
The Indian Sugar & Bio-Energy Manufacturers Association has formally approached the Ministry of Power in India, urging a revision of incentives for flex fuel vehicles under the upcoming CAFE-3 norms. The industry body has raised concerns that the diluted provisions in the current draft could slow down the momentum of ethanol-compatible vehicle development. While acknowledging ongoing government support for ethanol mobility, the association emphasized that policy strength must be maintained to ensure continued industry participation and investment in flex fuel technologies.
At the center of ISMA’s concern is the reduction of the Volume Derogation Factor, a critical mechanism that incentivizes automakers to produce vehicles compatible with ethanol blends. According to the association, weakening this parameter could discourage manufacturers from scaling up flex fuel vehicle production. ISMA also highlighted that maintaining robust incentives under both the Volume Derogation Factor and Carbon Neutrality Factor is essential to preserve confidence across the automotive and bio-energy sectors, ensuring sustained alignment with national fuel efficiency goals.
India has already achieved its 20 percent ethanol blending target ahead of schedule, supported by consistent policy measures and investments across sugar mills and grain-based distilleries. With production capacity now exceeding blending requirements, ISMA emphasized that expanding the flex fuel vehicle ecosystem is the most effective way to utilize surplus ethanol. This approach not only stabilizes the supply chain but also strengthens farmer income streams and enhances rural economic resilience through assured demand.
The association further underlined ethanol’s strategic role in reducing reliance on imported crude oil. By promoting flex fuel vehicles, India can improve its energy security and mitigate risks associated with global geopolitical uncertainties. ISMA pointed out that the ethanol program has already contributed to foreign exchange savings and facilitated timely payments to farmers, reinforcing the economic benefits of the biofuel ecosystem alongside environmental gains.
In addition to restoring incentive levels, ISMA recommended expanding the regulatory framework to include advanced vehicle configurations such as FFV-based plug-in hybrid and range-extended electric vehicles. Integrating these emerging technologies within CAFE-3 norms would ensure long-term adaptability and technological neutrality. The association stressed that such inclusion is necessary to future-proof policy frameworks while supporting innovation across multiple propulsion systems.
ISMA also called for the timely finalization and notification of the CAFE-3 norms. Regulatory clarity, it noted, is essential for automakers, investors, and ethanol producers to plan long-term strategies and capital allocation. A stable and forward-looking policy environment will be critical in aligning the country’s transportation evolution with broader objectives, including sustainability, reduced emissions, and strengthened energy independence.
The Ministry of Power has yet to issue an official response to the proposal. Currently in the draft stage, the CAFE-3 norms remain under stakeholder consultation and are expected to play a defining role in shaping fuel efficiency standards for passenger vehicles in India in the coming years.
Frequently Asked Questions
Why is ISMA requesting stronger incentives for flex fuel vehicles under CAFE-3 norms?
ISMA is advocating for stronger incentives because reduced provisions in the draft CAFE-3 norms may slow adoption of flex fuel vehicles and limit ethanol utilization. The association believes that restoring higher incentive levels under mechanisms like the Volume Derogation Factor and Carbon Neutrality Factor will encourage automakers to invest in ethanol-compatible vehicles. This is important for absorbing surplus ethanol, supporting farmers, and maintaining momentum in India’s transition toward sustainable and energy-secure transportation systems.
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