The growing dependence of India’s farm sector on groundwater threatens water resources sustainability and power sector viability. Sustaining India’s rising prosperity rests on managing groundwater. This study shows that raising power tariffs in the farm sector to achieve efficiency and sustainability of groundwater use is both socially and economically viable. The farmers, who are confronted with positive marginal cost of electricity and groundwater, obtain higher water productivity in their farming operations (Rs./m3 of water), use less amount of groundwater per unit area of farm (m3/ha), yet secure higher net return per unit of land (Rs./ha of land).This paper shows that establishing an energy quota for farms based on groundwater sustainability considerations, and metering and charging for power on pro rata basis using pre-paid meters are the best options to manage groundwater and the energy economy. The social benefit of reduced carbon emission, achievable through efficient electricity pricing, was estimated to be Rs. 709 crore per annum.