Petrol price was on Tuesday cut by 50 paisa and diesel by 46 paisa a litre, much lower than an anticipated decrease as oil companies left cushion for the government to mop up gains accruing from global oil prices dipping to multi-year lows.
Petrol will cost Rs 59.98 from midnight tonight in Delhi as against Rs 60.48 per litre currently.
Similarly, a litre of diesel will cost Rs 46.09 as compared to Rs 46.55 now, said Indian Oil Corp (IOC), the nation's biggest fuel retailer said.
The rate of basket of crude oil that India buys hit a 11-year low of $34.39 per barrel on Monday, but the average for the fortnight which is taken into account for calculating new prices, was $4-5 more.
Acting as a counter-balance was the rupee that fell to Rs 66.99 to a US dollar on Monday as against average of Rs 66.21 of second half of November for the previous cut.
Industry officials said the net impact of the two should have warranted a reduction of at least Rs 2 per litre but the oil companies have kept some cushion on cues that government may like to raise excise duty on the two fuels to mop up its revenues as it has done five times in last one year.
Excise duty was last raised on November 7; on petrol, by Rs 1.60 per litre and on diesel by 40 paise.
That increase in excise duty is to yield an additional revenue of about Rs 3,200 crore to the government during the rest of the current fiscal.
In the previous four hikes between November 2014 and January 2015, totalling Rs 7.75 per litre on petrol and Rs 6.50 a litre on diesel, it had mopped up about Rs 20,000 crore in additional revenue to meet fiscal deficit targets.
The government had collected Rs 99,184 crore in excise collections from the petroleum sector in 2014-15. This was Rs 33,042 crore in the first quarter of the current fiscal.
Tuesday's cut in prices is the second this month. Oil firms had last cut petrol price by 58 paise per litre and diesel by 25 paise on December 1.