The proposal for increasing power tariff in Tamilnadu seems to be justified considering the losses being incurred by the Tamilnadu Electricity Boar.
Electricity charges per unit should be the cost of generation plus a reasonable percentage of profit(say 10%) for the company. However, it should be ensured that the companies generating and distributing electricity function efficiently. In order to do this, competition should be introduced. For this purpose, the Electricity Board should be abolished and the individual generating units like Mettur Hydro electric project, Mettur Therman Power Plant, Ennore Thermal Power Plant etc. in Tamilnadu should be made separate companies. Distribution can also be entrusted to the generating companies.
While the cost of hydro power would be cheaper, cost of thermal power would be costlier. In order to even the cost of generation of thermal and hydro plants, government can charge the hydro power plants for the release of water and this amount could be used to subsidise thermal power if necessary.
Private sector may also be allowed equity participation in the power plants to ensure that the plants work with a profit motive which would ensure efficiency.