The Centre’s decision to waive CAFE-2 penalties for major automakers could stall green technology investments, as companies might rely on purchasing carbon credits rather than organically hitting their emission targets, auto industry sources said.According to sources, this decision could also prompt foreign automakers to import or assemble more gas-guzzling vehicles in India, rather than producing fuel-efficient or low-emission models.“The government has already provided a five-year window for generating the carbon credits, which essentially means there will be no penalty for any company. Retrospectively, this has been done to bail out the companies from paying any penalties. So, what is the use of making such policies?” said one of the industry veterans.Industry executives pointed out a stark contrast: while some companies are actively investing in low-emission technologies like CNG and hybrids, the government is bailing out original equipment manufacturers (OEMs) that have openly flouted CAFE norms.“So, basically you are penalising those OEMs who are reducing CO2 emissions from their vehicles by introducing various technologies and investing billions of dollars on research and development (R&D). Penalties should not be reduced or relaxed beyond a level that there is no motivation of exercising or working towards meeting those carbon emission targets,” the official added.Last week, the Ministry of Power (MoP) wrote to MDs and CEOs of 18 OEMs including Hyundai Motor India, Kia India , M&M, Maruti Suzuki India, Honda Cars India, Force Motors, JSW MG Motor, Renault India, Toyota Kirloskar Motor, Nissan India, Skoda Auto Volkswagen India, Mercedes-Benz India and BMW Group India, inviting suggestions or objections to the said amendments.According to the amendments, the Centre is completely bailing out all major OEMs, including Hyundai Motor India (HMIL), Kia India, Mahindra & Mahindra (M&M), Honda Cars India, Renault India, Skoda Auto Volkswagen India and Nissan India, from paying heavy penalties collectively amounting to ₹2,700 crore for violating CAFE-2 norms.The final order entirely wipes out the industry’s compliance liabilities, which the government had already drastically recalculated to around ₹2,700 crore from an initial estimate of roughly ₹8,800 crore.Furthermore, the centre has extended the compliance runway by allowing automakers to offset their emissions debits all the way through September 30, 2027, stretching beyond the previously suggested March 31, 2027 deadline via the exchange of carbon credits.“This step by the government is fundamentally penalising those companies who have invested heavily on meeting the CAFE norms. OEMs who neither invested in technology to meet the norms nor paid the penalties, will be enjoying with all the benefits now,” said another executive from the industry.The executive said that those companies who have been penalised were all profit making OEMs, and none of them were even a loss-making company, so such a decision by centre to bail out these companies was a surprise.“The government had already drastically reduced the penalties to around ₹2,700 crore from around ₹8,800 crore earlier, so we don’t know behind this logic of bailing out these profit-making companies. How do you justify this in the national interest, we don’t get it,” said the executive.According to another industry veteran, these amendments are like cross-border carbon trading or international carbon offsetting, where an individual or a company can buy carbon credits from projects located in foreign lands. It allows individuals and companies to fund climate projects like reforestation or renewable energy globally, and in return they can show the credits to the government at the end of the year.Published on July 5, 2026