Availability Based Tariff (ABT) is a commercial mechanism launched in India since 2003 to improve grid discipline in an inherently energy deficient system In this structure cost of unscheduled electricity purchased by State Electricity Boards (SEBs) from Central Generating Stations (CGS) is inversely proportional to grid frequency. The quantitative impact of pumped storage (PS) on frequency profile is analyzed by formulating the problem as a constrained linear programming one. We initially show that pumped storage can improve the operating frequency profile and economics of a region. But while dimensioning the storage emissions need to be addressed and hence, three different objectives are posed-Optimal generation scheduling with conventional least cost strategy, Optimal generation scheduling with least emission strategy, Optimal generation scheduling with combined economic and emission dispatch strategy. Utilizing the TamilNadu grid as a case study, it is shown that pumped storage on daily schedule has a beneficial impact on economics but increase emissions. Hence optimized generation scheduling with due consideration to emission factors of thermal plants is required. © 2007 RPS.