The monthly hike in price came after several rounds discussions that the new Oil Minister Dharmendra Pradhan held with state-owned oil firms on continuing with the reform initiated by the UPA government.
The announcement of the hike gave clear indications that the BJP government will continue with reforms of the previous Congress regime.
The UPA had in January 2013 decided to raise diesel prices in small doses of upto 50 paise every month till such time that the subsidy on nation's most consumed fuel is eliminated.
The hikes, effective from midnight tonight, are excluding state sales tax or VAT and actual increase will be higher and will vary from city to city, the oil companies announced.
Diesel price in Delhi will be hiked by 57 paise after including taxes, to Rs 57.28 per litre, while it will cost Rs 65.84 a litre in Mumbai as against Rs 65.21 at present.
Price of diesel were last hiked on May 13 when rates went up by Rs 1.09 a lite, excluding local levies. That hike which translated into Rs 1.22 in Delhi after including VAT, made up for rate hikes for two months as government deferred rates in April due to general elections.
Before today's increase, diesel prices had risen by a cumulative Rs 9.55 a litre in 15 instalments since January 2013.
"Even after the current increase, under recovery (loss) on retail diesel shall stand at Rs 2.80/litre," Indian Oil Corp, the nation's largest oil firm, said in a statement announcing the hike.
Besides diesel, the oil firms are losing Rs 32.87 a litre on kerosene and Rs 432.50 on LPG (per cylinder).
"For the year 2014-15, the Corporation is expected to incur under-recovery of around Rs 53,600 crore on sale of three sensitive products (Industry around Rs 101,700 crore)," the statement said.