This paper has been prepared inaccordance with the terms of reference for a study on powersystem planning in India: incorporating externality costsand benefits.It reviews estimates of the external costs ofpower in international studies as well as in India andcompares the figures available.It also comments on thevalidity of the external cost estimates available and theuse made of them in power system planning and regulationboth outside and inside India.The structure is as follows.Section two reviews the external cost estimates ofelectricity generation in the European Union (EU), and othercountries.It also reports some recent work on the externalcosts associated with transmission.Some comments for therange of estimates are offered.Section three reviews a fewstudies on external costs for India and compares those withthe international estimates. Section four discusses theuse made of external cost data in power system planning andregulation both internationally and in India and makes somerecommendations for possible reforms in the Indian case.Section five reviews the Indian and international estimatesof external costs of hydro and section six does the same forresettlement and rehabilitation (RR) costs. Section sevenoffers some conclusions.