Full Breakdown
India’s New Data Centre Evaluation Framework Aims to Align Power, Water and Incentives with Sustainable Growth
By Drooid · · How we work
Core Policy Overview
The non-binding criteria ask state governments to verify that proposed data-centre campuses have sufficient electricity, water, land and connectivity before granting approvals. Developers must submit a joint Power-Readiness and Ramp-up Plan with distribution companies and state transmission utilities, detailing demand, sanctioned capacity, year-wise availability and required grid upgrades. Projects over 20 MW must install automated demand-response systems linked to State Load Dispatch Centres. Water-stress assessments covering a 20-30-year horizon are required, with allocations that do not diminish supplies for existing users. Incentives are tied to milestones such as commissioning, renewable-energy use, power-usage effectiveness (PUE), water-usage effectiveness (WUE), local employment and domestic procurement.
Background & Context
India’s AI-driven digital expansion has spurred a surge in hyperscale data-centre construction. JLL estimates national capacity at roughly 1.6 GW in mid-2026, potentially reaching 6 GW by 2029, backed by an anticipated $110 billion of investment. Global firms—including Google, Amazon, Microsoft, Adadi and Reliance—are securing large campuses, some demanding over 400 MW of power. Local opposition has emerged over electricity draw, water consumption, noise and environmental impact, exemplified by protests against Amazon’s Thane project and challenges to Google’s Visakhapatnam site.
Data & Statistics
Official Statements & Responses
Debjani Ghosh, distinguished fellow at NITI Aayog, said the framework is intended to “plan infrastructure ahead of demand” and link incentives to outcomes such as employment, skilling and domestic procurement. NITI Aayog member Abhay Karandikar highlighted the need to assess who benefits from projects, noting that data centres exporting energy and water differ from those building national assets. The framework also proposes a central audit mechanism under MeitY and suggests bringing data centres under the Essential Services Maintenance Act to prevent service disruptions.
Why It Matters
By tying approvals and incentives to verified power and water capacity, the framework seeks to prevent the “grid-stress” and “water-stress” scenarios seen in other cities. Ensuring renewable-energy and battery-storage arrangements are operational before counting them toward grid reductions aims to curb reliance on diesel generators. Linking incentives to local employment and domestic procurement could deepen India’s participation in the global AI supply chain, while the central audit and ESMA provisions provide mechanisms to enforce compliance and protect essential services.
Conflicting Reports & Gaps
Sources differ on current national capacity: MeitY cites 1.5 GW in 2025, whereas JLL reports approximately 1.6 GW in mid-2026. The framework outlines extensive evaluation metrics but does not specify a timeline for adoption; the draft National Data Centre Policy announced in 2020 remains unimplemented. Details on how states will finance required grid upgrades and the exact criteria for “red zones” are also absent.
What’s Next
NITI Aayog plans to provide a model state notification to bring data centres under the Essential Services Maintenance Act. A centralized audit mechanism, with MeitY as the nodal agency, will periodically verify compliance. States will use the framework to develop a matrix of clearances and a digital single-window tracking system, though the schedule for final policy enactment has not been disclosed.