Abstract: This paper examines the nature of rural electricity tariffs existing in India and finds that in most cases, there is no special treatment of the rural consumers for tariff purposes, except for agricultural use. There is need for distinct rural electricity tariffs to reflect the costs of supply and to account for targeted subsidies for the rural areas. The factors to be considered for setting up distinct rural electricity tariffs are discussed. These include issues related to subsidy and financial viability of rural electricity supply and the constraints for setting distinct rural tariffs in the Indian context. Separate electricity tariffs for the rural areas could be justified on the basis of cost and quality of supply, better accounting of financial resources, and other social parameters. However, information constraints, political acceptability, and regulatory management of such spatial tariffs may be difficult. There is need for a holistic treatment of the issue of rural electrification and electricity tariffs as opposed to the piecemeal approach followed so far.