Petrol price was on Tuesday slashed by Rs 3 per litre, the steepest reduction in rates in over five years.
The fourth reduction in rates since March means that petrol in Delhi will cost Rs 63.09 a litre with effect from midnight tonight as against Rs 66.09 per litre currently.
Rates will vary from city to city depending on local sales tax or VAT.
In Mumbai, petrol price has been cut by Rs 3.15 to Rs 69.73 per litre, while the fuel in Kolkata will cost Rs 70.35 from tomorrow as against Rs 73.48 per litre. The reduction in rates in Chennai would be Rs 3.18 per litre to Rs 65.90.
Today's price cut comes after three consecutive rate reductions on the back of falling international oil prices.
State-owned oil firms, which revise rates every fortnight, had from April 16 cut petrol price by Rs 1.20 a litre in Delhi.
On March 16, the rates were cut by Rs 2.40 per litre and by Re 1 in the following fortnight.
The price cut announced today is the steepest since December 2008 when rates were slashed by Rs 5 to Rs 45.62 per litre.
Announcing the reduction, Indian Oil Corp (IOC), the nation's largest fuel retailer, said that since the last price change, international prices have declined from USD 116.61 per barrel to USD 107 a barrel. Rupee-US dollar exchange rate too improved from Rs 54.51 to a US dollar to Rs 54.26.
"Thus, it has been decided to pass on the benefit to customers and accordingly the aforesaid reduction in the retail selling price of petrol is being affected," an IOC statement said.
Besides enabling reduction in petrol prices, the falling international oil rates have meant that the losses on diesel sales too fall to Rs 3.80 per litre from Rs 6.48 on April 16.
Oil firms have not raised diesel prices this month apparently due to Assembly elections in Karnataka, the home state of Petroleum Minister M Veerappa Moily. They are due on May 5.
The government had in January authorised oil firms to raise diesel rates by 40-50 paisa per litre every month till such time that the losses on the nation's most consumed fuel are completely eliminated.
The diesel price revision was due on April 16 but oil firms skipped it. IOC said oil firms are losing Rs 3.80 per litre on diesel, Rs 27.93 a litre on kerosene and Rs 379 per cylinder on domestic LPG.
Oil firms calculate the desired retail price on 1st and 16th of every month based on average imported oil price on the previous fortnight.
Although petrol prices had been deregulated in June 2010, they have rarely moved in tandem with cost. This resulted in Rs 500 crore loss to IOC (Rs 1,150 crore loss to state fuel retailers) during 2012-13.
However, since January, when the government decided to cut subsidises by asking oil firms to moderate prices in step with cost, petrol prices have moved in sync with cost.
Diesel prices continue to be regulated, but the government had in January authorised oil firms to hike the rates by 40-50 paise per litre every month till such time that the entire revenue loss on the fuel is completely wiped off. Oil firms raised diesel prices by 50-51 paise per litre on three occasions since then.