India's government cut fuel duties on Thursday in an attempt to quell public anger and opposition pressure ahead of elections due in 2019.
Following sharp rises in recent months due to a higher oil price and a record low rupee, the retail price for both petrol and diesel were cut by 2.50 rupees ($0.034) per litre.
Finance Minister Arun Jaitley said the excise duty had been cut by 1.50 rupees per litre while oil marketing companies had taken a revenue hit of one rupee per litre.
Jaitley also urged state governments to cut the value added tax by a further 2.50 rupees per litre so that consumers could get a total benefit of five rupees per litre.
"I hope all state governments do this, and they announce this so that consumers benefit by five rupees," he told reporters.
High fuel prices have been hitting middle-income family budgets across the country as New Delhi struggles to contain inflation.
Last month protesters led by opposition parties took to the streets, demanding the government roll back prices.
India's main opposition Congress party has latched on to fuel prices to criticise Prime Minister Narendra Modi's government, which will be seeking a new term next year.
There are also a number of state elections later this year.
India's rupee has been hitting new lows against the dollar as emerging market currencies suffered losses. This has driven up the cost of India's massive imports of oil, which are priced in dollars.