Cairn India on Saturday started pumping crude from its Rajasthan block, the first major oil discovery in the energy-hungry nation in more than two decades.
Prime Minister Manmohan Singh turned the valves to open oil wells in the Mangala field and also inaugurated the oil processing terminal in the Thar desert near the Pakistan border.
Petroleum Minister Murli Deora and Rajasthan Chief Minister Ashok Gehlot witnessed the milestone event.
Mangala, one of the world's largest new onshore finds, is the biggest in India after Oil and Natural Gas Corporation's Gandhar in Gujarat that was discovered more than two decades ago.
For the Asia's third largest oil consumer that imports 75 per cent of its oil needs, the Rajasthan oilfields will cut its oil import cost by USD 6.8 billion or 7 per cent.
Peak output of 175,000 barrels per day (8.75 million tonnes a year) by 2011 from Mangala, Bhagyam and Aishwariya -three of the 25 discoveries Cairn has made in the Rajasthan block - will account for about 28 per cent of India's current oil production.