Four precepts sustain the tariff philosophy driving power sector reforms in India: (1) The cost of service methodology is the most appropriate for the determination of tariffs. (2) Efficiency gains can neutralise the need for realignment of tariffs to efficient levels. (3) The developer must share the burden of adjustment under the reform process. (4) The burden of subsidies on public finance can decrease through reforms. This paper assesses the historical imperatives of these precepts and examines their validity in the light of recent experience with reforms.
