State-run oil refiners will cut petrol prices by about 3.2 percent from Wednesday, the first reduction since the government ended pricing controls nearly 18 months ago.
With the latest cut of 2.22 rupees a litre, a litre of petrol in Delhi will now cost 66.42 rupees.
Indian Oil Corp, the country's biggest fuel retailer, confirmed cutting petrol prices by 1.85 rupees a litre excluding local taxes.
"Basic price has been cut by 1.85 rupees litre (over 3 cents) and add a 20 percent value added tax in Delhi. It should be about 2.22 rupees a litre," a company source told Reuters.
Earlier this month, state oil retailers -- Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp -- raised petrol prices, the sixth major adjustment since June 2010.
The move, which raised the price of petrol in Delhi by 1.80 per litre, spurred public backlash and criticism from political parties within and outside the government given high inflation and a bulging fiscal deficit.
India's headline inflation was nearly unchanged in October at 9.73 percent, above the 9 percent mark for the eleventh straight month, in spite of 13 interest rate rises by the Reserve Bank over the past year and a half.
"The reduction has been possible as a result of favourable impact of the slide down both in the international prices of gasoline and in the Rupee/Dollar parity," the statement said.
The rupee dollar exchange rate came down marginally and remained more or less stable at around 49.30 rupees to a dollar in the fist fortnight of this month, it said.
"If the Rupee/Dollar parity remains at this level or moves further away, its impact would get reflected in the next pricing cycle," the IOC statement said.
The rupee has been Asia's worst performing currency this year and continued to trade at its lowest level in nearly 32 months at 50.67/68 per dollar.
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