The Department for Transport is considering legal options to abolish the minimum rates for parking penalty charges to allow local authorities to lower fines for minor parking violations.
It also wants local authorities to publish their parking accounts in a bid to create more transparency around fines.
It today formally responded to a Commons Transport Select Committee report published last year which found "a deep rooted perception that local authorities view parking enforcement as a cash cow".
It also said it was "hard to justify parking fines that are substantially more than the fines for more serious offences like speeding".
Transport Secretary Patrick McLoughlin froze parking penalty charges in December for the remainder of the current Parliament.
He also published a public consultation on parking issues, including whether five minute grace periods, which some councils already operate voluntarily, should be made a statuary requirement.
It is also seeking views on whether to end the use of cameras for on-street parking enforcement.
Last year the Local Government Association calculated that councils made a £411m surplus from both on and off street parking in 2011-12, while the RAC Foundation said the figure was £565m.
The consultation will end on February 14.
Louise Ellman, chairwoman of the Transport Select Committee, welcomed the Government's consultation on the report's findings.
She told Daybreak: "There is a feeling that people aren't being treated very fairly, and that's what the report was about.
"Councils do have a lot of discretion and that's right as it is a local service.
"But it is about being reasonable.
"Councils must be much clearer about what they are doing with their money and what money they are making."
She added that councils are not legally allowed to put up parking fines in order to raise revenue but that Government needs to make the law clearer to local authorities.
Professor Stephen Glaister, director of the RAC Foundation, said parking fines need to be proportionate and urged councils to be more transparent.
"Parking can be big business for councils with English local authorities making a profit of almost £600 million between them last year," he said.
"We should see most parking offences for what they are. Not crimes but misdemeanours and we need enforcement that reflects this.
"We need some proportionality and transparency. At the very least all councils should publish an annual report outlining what their parking policy is, how charges are set and where any surplus goes.
"It was almost four years ago that the coalition promised to end the war on the motorist. It isn't over yet but perhaps these latest proposals will take us a step closer to victory."