The move would bring the VAT on diesel in line with the neighbouring Haryana, they said.
"We request you to bring the VAT on diesel down to 8.8 percent, thereby bringing it at par with Haryana, during the forthcoming budget of the Delhi government," the DPDA wrote to Chief Minister Sheila Dikshit.
The Delhi government is scheduled to table its budget in the state assembly May 28.
"If the prices are brought at par with Haryana, Delhi will manage to sell the quantity of diesel it used to sell in 2008, which is 17.22 crore litres per month, and even after a reduction of 95 paise per litre, the state will end up earning INR54 crore per month as against INR35 crore it earns now every month," the DPDA stated.
The letter indicated that the reduction in the VAT will help in controlling environment pollution in capital.
"The truck and taxi fleet owners are presently buying diesel from Haryana due to price difference. The diesel sold outside Delhi is of Euro III quality, which causes more pollution than Euro IV quality diesel sold in the capital," the letter said.