India is cutting fuel prices from midnight to take advantage of falling crude prices and to try to boost the economy.
State-run fuel retailers will be allowed to drop petrol prices by five rupees (10 US cents) a litre and diesel by two rupees a litre.
It is the first cut in fuel prices for 22 months in India, where the costs of most widely used fuels are partly subsidised by the government. LPG and kerosene remain unchanged.
Fuel prices were increased in June before oil reached a record $US147.27 per barrel on 11 July. Oil prices globally are now more than $US100 below this.
The fall has given the Indian government more room to move on its expected economic stimulus plans.
The fall was announced by Oil Minister Murli Deora. It should bring prices in Delhi to about 45.6 rupees a litre. Prices around the country may vary.
Analysts say the move could be combined with a cut in short-term interest rates over the weekend in an expected economic stimulus announcement.
General elections are due in the first half of next year.