Kejriwal, who took oath of office Saturday, also suggested an audit of the power companies in the capital, giving them time until Wednesday morning to file their objections, if any.
In the meantime, he said that those consuming up to 400 units - 0 to 200 units and 201 to 400 units - of electricity a month would get 50 percent subsidy.
The new power rates will come into effect from Wednesday - Jan 1.
"The measure would benefit 28 of the 34 lakh households in Delhi," Kejriwal told reporters after the cabinet meeting.
He said the intended beneficiaries are the poor and the middle class.
Kejriwal estimated the revision in electricity tariff would cost the government Rs.200 crore but Rs.140 crore of this would be borne by the power companies against their outstanding.
Tuesday's decision came a day after he announced that 667 litres of water would be provided free of charge to all households in the capital who have metered connections.
Kejriwal, whose Aam Aadmi Party made providing water and drastically cutting power rates its main election promise, also met Comptroller and Auditor General (CAG) Shashi Kant Sharma to seek an audit of the power distribution companies in teh capital.
He said the Congress government lied to the Delhi High Court when it objected to auditing of power discoms. "The CAG is ready for the audit," he added.
Delhi has three power discoms - BSES Rajdhani Power Limited, BSES Yamuna Power Limited and North Delhi Power Limited.
Kejriwal told the media his government would wait for the responses from the companies before taking a final decision on the audit.
"By tomorrow evening we will decide whether to go for audit or not," he said.
Reacting to the decision, Bharatiya Janata Party leader Harsh Vardhan said: "This is no reduction actually. He is giving subsidy to the people at the cost of tax payers' money, which is meant for implementation of welfare schemes."
--IANS (Posted on 31-12-2013)