However, regulations framed in 2002 had made it difficult for new players to obtain a retail license, such as an investment commitment of 20 billion rupees ($282 million) in the country's oil and gas sector.
Under the new rules, any company with a net worth of 2.5 billion rupees will be eligible for marketing rights, a government statement said, paving the way for convenience stores, shopping malls and hypermarkets to sell fuel.
Indian fuel retailing is dominated by state refiners - Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp.
Companies including Reliance Industries, Royal Dutch Shell and Nayara Energy, partly owned by Russian oil major Rosneft, account for about 10% of the roughly 64,625 fuel stations in the country.
The new rules will help in attracting investment and create jobs, Information and Broadcasting Minister Prakash Javadekar told a news conference. "Competition will increase productivity and services, eventually benefiting the consumers," he said.