Electricity consumption in India is increasing rapidly. The increased demand forces the electricity boards to increase their generating capacity. The huge investments in generation, transmission, and distribution (at the cost of alternative development projects) adversely affect India＇s foreign exchange reserves. Also internal resources like coal are utilized at great risk to the environment This article tries to shift the focus from supply augmentation to demand management by analyzing the existing pricing policy mechanism and suggests different tariffs based on long-rang marginal costs. It is shown that the ＇＇economic pricing＇＇ based on long-run marginal costs is an indicator of efficient utilization of resources.