A decision in this regard was taken at the state cabinet on Wednesday.
"The state government has decided to forego Re 1 from its tax portion and as a result, the loss to the exchequer would be Rs 509 crore in a year," Chief Minister Pinarayi Vijayan told the media.
"We wish to send a message to the Centre that despite pleas from several quarters, it is not doing anything to bring some relief to the people. The price of fuel products is rising when international prices are falling. We did this because we wish to show our intent," he added.
The petrol price in the state today was Rs 82 per litre, while for diesel it was Rs 75, he said.
(With inputs from agencies)