Indian electric tariffs are characterized by very high rates for industrial and commercial classes to permit subsidized electric consumption by residential and agricultural customers. We investigate the viability of this policy using monthly data for 1997-2003 oil electric consumption by a few large industrial customers under the aegis of a small distribution company in the state of Uttar Pradesh. For a given price/cost ratio, it can be shown that if the cross-subsidizing class' electricity demand is sufficiently elastic, increasing the class' rates fail to recover incremental cross-subsidy necessary to support additional revenues for subsidized classes. This suboptimality is tested by individually estimating time-variant price-elasticities of demand for these industrial customers using Box-Cox and linear regressions. We find that at least for some of these customers, cross-subsidy was suboptimal prior to as late as October 200 1, when rates were changed following reforms. (c) 2006 Elsevier Ltd. All rights reserved.