Tata Motors wants changes in D

India’s largest electric passenger vehicle (PV) maker supports the introduction of the credit-debit mechanism in principle, but wants significant changes in its design. business standard It has been revealed from the sources. The newspaper also reviewed a copy of the July 14 letter sent by Tata Motors to the power ministry and the Bureau of Energy Efficiency (BEE).

The letter was sent days after the Center proposed amendments to the CAFE-II framework to introduce a market-based credit-debit mechanism for PV manufacturers. According to the proposed amendments, manufacturers who stay on top of their set fuel-efficiency targets will earn tradable credits and those who fall short will accumulate debits. The proposal also allows manufacturers with debit balances to purchase credits from BEE at ₹2,500 per gram CO2/km. Tata Motors did not respond business standardDee’s email for comments till press time.

These amendments follow the Centre’s decision to waive around ₹2,700 crore in penalties that many PV manufacturers would have otherwise faced under the CAFE-II regime. They propose to replace the purely penalty-driven approach with a market-linked compliance mechanism.

Tata Motors supports the broader objective of creating a credit market, but argues that the proposed framework risks undermining the incentive structure that the CAFE rules aim to create.

‘It’s cheaper to buy credit than comply’

The company’s strongest objection relates to the pricing of credits sold by BEE. According to its letter, clause (f) of the draft notification allows manufacturers with debit balance to purchase credits directly from BEE at ₹2,500 per gram CO2/km. Tata Motors says non-compliance with the Energy Conservation Act results in around ₹5,000 per gram CO2/km, which means the proposed BEE credits will be available at half the statutory cost.

The company argues that such a structure could fundamentally change the investment decisions of PV manufacturers.

“If the cost of modifying products, improving fuel efficiency, changing technology or otherwise achieving compliance exceeds ₹2,500 per gram CO2/km, it becomes cheaper to buy credits than comply,” the letter said.

Tata Motors argues that such an outcome would defeat CAFE, which aims to incentivize manufacturers to improve powertrains, invest in clean technologies, optimize product portfolios and reduce fleet emissions over successive model cycles, rather than providing a low-cost post-facto compliance pathway.

The company has also objected to the proposed dual role of BEE under the draft mechanism.

According to the draft, BEE will verify credits and debits, manage passbooks of manufacturers and monitor compliance, as well as sell credits directly to manufacturers.

Tata Motors says the combination of roles of regulator, market administrator, price-maker and seller could lead to loss of confidence in the market.

“A credit market can only achieve confidence if the regulator remains clearly neutral,” the company says, adding that BEEs should be responsible for verification, records and compliance oversight. It should facilitate transactions between manufacturers and not be a market participant itself.

Instead the company proposed that manufacturers exceeding their targets should trade credits directly with manufacturers facing compliance gaps. It said this method would allow market-based price discovery while maintaining regulatory neutrality.

Tata Motors says compliance credits should only arise from genuine, measurable and verified “over-compliance” with fuel-efficiency targets. It added that the credits generated by paying only to BEE, without any reduction in fuel consumption or emissions, would not represent the actual environmental performance.

The letter says manufacturers that have exceeded CAFE targets have incurred significant engineering costs, accepted commercial risks and allocated capital to clean technologies and improve fleet efficiency. It argues that credits earned through such investments should not be outweighed by credits created administratively without environmental benefits.

According to the company, unlimited BEE-generated credits could reduce the value of credits generated through actual over-compliance and weaken incentives for future investment in clean technologies.

carry forward surplus credit

Tata Motors has suggested that credits earned through verified “over-compliance” should be allowed to be carried forward to subsequent compliance periods instead of ending at the end of the FY23-FY27 block.

The company says that since such credits represent environmental benefits already delivered and investments already made, allowing them to expire could discourage manufacturers from exceeding future targets.

Tata Motors has requested the power ministry and BEE to make four major changes before finalizing the framework.

It has sought to remove the provision allowing BEE to sell credits directly to manufacturers; Proposed that credits should arise only from verified super-compliance by vehicle manufacturers; Recommended retaining statutory consequences for any remaining non-compliance after actual manufacturer-generated credits have been exhausted; And requested that unused credits be allowed to be carried forward into future compliance blocks.

The company supports the government in setting up a credit-debit mechanism under the CAFE framework, but safeguards are needed to maintain market integrity, reward genuine over-achievement and ensure that the mechanism continues to drive fuel efficiency, low emissions and clean mobility.

TAMO supports a market-based credit mechanism in principle but says its design weakens incentives for clean technologies.

Manufacturers with debit balance can buy credits directly from BEE at ₹2,500 per gram CO₂/km

It argues that this makes non-compliance cheaper than compliance as the statutory penalty under the Energy Conservation Act is around ₹5,000 per gram CO₂/km.