FinanceMinister Nirmala Sitharaman announced a cut in excise duty on petrol by 8rupees ($0.1028) per litre, and 6 rupees per litre on diesel.
The new taxregime on petrol and diesel could result in a loss of about 1 trillion Indianrupees to the government in annual revenue due to the lower collection, shesaid in a series of tweets.
Thegovernment also removed the import duty on anthracite, PCI coal and coking coalin a bid to reduce raw material costs for local market demand.
The latestmeasures will be effective from May 22, the government said in a notificationafter the announcement by Sitharaman, who also urged state governments tofollow suit with similar reductions on fuel prices keeping in line with federalplans.
A litre ofpetrol currently costs 105.41 rupees, while diesel is at 96.67 rupees in NewDelhi.
Thegovernment will also provide a fresh subsidy of 200 rupees per cooking gascylinder to over 90 million beneficiaries under a welfare scheme introduced forwomen below the poverty line.
The subsidywill have an annual revenue implication of nearly 61 billion Indian rupees,Sitharaman said.
"PrimeMinister Narendra Modi has specifically asked all arms of the government towork with sensitivity and give relief to the common man," she said.
Thegovernment was also working to reduce taxes on raw materials for plasticproducts to lower down the cost of final products.
Experts saidthe latest moves will likely increase fiscal concerns and raise doubts aboutgovernment meeting its deficit target of 6.4 percent of GDP for 2022-23.
Butinflation has become a major headache for Modi"s government ahead of electionsto several Indian state assemblies this year.
A sharp jumpin inflation meant input costs escalated for businesses.
The riseprompted the central bank to hike interest rates at an unscheduled policymeeting this month.
"Today"sdecisions, especially the one relating to a significant drop in petrol anddiesel prices, will positively impact various sectors, provide relief to ourcitizens," Modi wrote on Twitter. "It is always people first forus!"
