The reduction, effective midnight tonight, excludes local sales tax or VAT and the actual cut will be higher, varying from city to city.
The price of petrol was last increased by 60 paise on March 1 and will cost Rs 72.26 a litre in Delhi, down 90 paise from Rs 73.16 at present. In Mumbai, the fuel will cost Rs 80.89 a litre against Rs 82.07 currently.
Indian Oil Corp, the nation's largest oil firm, said since the last revision in petrol prices, there has been a dip in international oil rates and the rupee has strengthened against the dollar.
"The combined impact of both these factors has resulted in reduction in price of petrol, the benefit of which is being passed on to consumers through price decrease of Re 0.75 per litre, excluding VAT," it said.
However, state-owned oil firms will not raise diesel prices by the monthly 50 paise a litre decided in January last year as the loss on the fuel has dipped below the threshold of Rs 6 a litre because of the twin factors.
"The under-recovery on diesel is currently Rs 5.93 per litre which is below Rs 6 a litre, which is the interim subsidy cap recommended by the Expert Group 2013 of Dr Kirit Parikh.
"Hence, the issue of monthly price increase is under consideration of the government and the matter has been referred to the Election Commission. A decision regarding
revision of diesel retail price shall therefore be taken on receipt of further advice by the government in this context," IOC said.
Since January 2013, diesel rates have risen by Rs 8.33 over 14 monthly installments.
Besides diesel, oil firms lose Rs 34.43 a litre on kerosene sold through the public distribution system and Rs 505.50 on every 14.2-kg cylinder of domestic cooking gas.
The price of petrol was last cut on November 1, when it was reduced by Rs 1.15 a litre, excluding local taxes. Losses on kerosene and LPG have declined from Rs 36.34 a litre and Rs 605.50 per bottle, respectively, at the beginning of the month.
"During 2013-14, IOC has suffered an under-recovery on sale of three sensitive products of around Rs 73,000 crore (industry around Rs 1,41,000 crore)," the statement said. The movement of prices in the international oil market and the rupee-US dollar exchange rate are being monitored closely and developing trends will be reflected in future price changes, IOC added.