The decision comes a day after Prime Minister Narendra Modi announced from the ramparts of Red Fort in his Independence-Day speech that prices of knee surgery would be brought down.
As part of the initiative, the National Pharmaceutical Pricing Authority (NPPA) has capped the price of widely used Cromium Cobalt knee implants at Rs 54,720.
It used to cost between Rs 1.58 lakh and Rs 2.5 lakh earlier.
"After cardiac stents, we have now decided to bring knee implants under price control," Chemicals and Fertilisers Minister Ananth Kumar told reporters.
The move will result in savings of around Rs 1,500 crore annually for an estimated 1.5 lakh patients requiring knee replacement surgery every year, he added.
Justifying the move, Mr Kumar said, "The government will not be a mute spectator to illegal and unethical profiteering."
He further said the government will take stringent action against hospitals, importers, retailers if they charge in excess of the MRP.