Ethanol Makers To Govt: Treat Flex-Fuel Cars Like EVs In CAFE3 Rules
The All-India Distillers' Association has written to the Ministry of Petroleum and Natural Gas asking it to revise the draft CAFE 3 framework before it is finalised, specifically calling out what the industry describes as unequal treatment for flex-fuel vehicles relative to battery electric and plug-in hybrid cars. The letter zeroes in on a single technical metric that will decide which vehicle technology gets commercially built at scale: the Volume Derogation Factor.
In the CAFE framework, the VDF is a multiplier. When a manufacturer sells one BEV, the compliance system counts it as 3 cars for the purposes of calculating the fleet average CO2 emission figure. This makes it mathematically easier for a manufacturer to meet the fleet target by selling EVs, because each EV reduces the apparent average more than a conventional car would raise it.
Under the draft CAFE 3 norms, BEVs (battery electric vehicles) and range extender hybrid electric vehicles (PHEVs) carry high VDF values of 3 and 2.5 respectively. A standalone flex-fuel vehicle, one that can run on petrol or any blend up to E85, is proposed at a VDF of 1.1-1.5. That means a flex-fuel car counts as barely more than a regular petrol car in the compliance calculation.
AIDA is asking that the VDF for FFVs be raised from 1.1 to a minimum of 2.0, and ideally 2.5. This will bring it at par with range-extender hybrids with respect to VDF, and just 0,5 lesser than pure electric vehicles.
The All-India Distillers' Association represents the companies that produce ethanol in India, primarily from sugar molasses and grain. Every litre of ethanol that replaces petrol in a vehicle engine is a litre of ethanol sold commercially, which is directly good for distillery revenues. The faster flex-fuel vehicles enter the mainstream market and the higher the ethanol content those vehicles can run on, the larger the addressable demand for the distillery sector.
Brazil is the reference point. Brazil runs over 70 percent of its passenger vehicle fleet on flex-fuel. Almost every car sold there since the mid-2000s has been capable of running on any blend from pure petrol to pure ethanol. The result is a domestic ethanol market of around 30 billion litres annually.
India's domestic ethanol supply was approximately 7 billion litres in FY2025, with blending targets set at E20. Moving to E85 on a significant vehicle fleet would require a multiple-fold increase in ethanol production, which is exactly what distilleries want.
From a manufacturer's perspective, a VDF of 1.1 for FFVs creates very little commercial incentive to invest in flex-fuel technology. The engineering changes required for an FFV are not trivial: ethanol-resistant fuel lines and seals, revised injector calibration, a higher compression ratio in some engines, and ECU programming to handle any blend between E0 and E85.
That is money spent on development and tooling. If the CAFE compliance return from that investment is a multiplier of 1.1, versus a multiplier of 5 to 7 for a BEV in some frameworks, the manufacturer has no logical reason to prioritise FFV development over EV development.
Raising the VDF to 2.0 or 2.5 would change that calculus. A flex-fuel variant would then materially help a manufacturer's fleet average, creating a direct commercial incentive to offer FFV options across volume segments, particularly in the two-wheeler and sub-compact car categories where EVs still face affordability barriers.
Road Transport Minister Nitin Gadkari, a long-standing advocate for ethanol in transport, has said the CAFE 3 norms will be reviewed within 15 days and that EVs and flex-fuel vehicles may receive similar treatment in the revised framework.
That statement, made around the same time as the AIDA letter, suggests the ministry's position is not fixed. The outcome of that review will determine whether the CAFE 3 rules push the market firmly toward battery electrification or create space for a parallel flex-fuel path.
For someone buying a vehicle in 2027 or 2028, the VDF outcome will influence which options are available at what price. A high FFV multiplier means manufacturers bring flex-fuel variants to market, giving buyers an E85-compatible car that costs less to run per kilometre when E85 is cheaper than petrol. A low multiplier means EVs and PHEVs dominate CAFE3compliance, and flex-fuel vehicles stay a niche.