India prepares national data center policy amid water and power concerns

India is preparing a national data center policy as opposition to major projects puts water and electricity access under scrutiny. CNBC’s October 21 report describes a push for clearer approvals and resource safeguards, following an October 14 policy announcement. A government assessment framework spells out how states could test whether proposed facilities have the infrastructure they need.

Junior electronics and information technology minister Jitin Prasada announced the policy plan on October 14. He reportedly said India wants to avoid consumers paying more for electricity because they must compete with data centers for supply. Experts involved in consultations told CNBC they expect more consistent rules to simplify approvals and address land-acquisition challenges.

Local resistance tests utility promises

The disputes involve some of the sector’s biggest investors. Residents opposing an Amazon data center near Mumbai worry the facility could receive priority access to water and electricity during shortages, according to local media reports cited by CNBC. Environmental activists have also demanded cancellation of permissions for AI data centers in Visakhapatnam, where Google is constructing a $15 billion project.

Amazon told CNBC its data centers do not use water for cooling or draw electricity from the local distribution network serving homes, shops and businesses. It said it is holding educational sessions with the community and will participate in government consultations on data center regulations. Google did not respond to CNBC’s request for comment.

Test the whole campus before approving growth

Published on October 14, NITI Aayog’s Data Centre Evaluation Framework gives states common assessment principles while allowing them to adapt those principles to local priorities and resources. It recommends evaluating the full planned campus, rather than treating each capacity addition in isolation, and matching construction milestones to power, water, land and connectivity readiness.

For electricity, the framework calls for developers, distribution utilities and state transmission utilities to jointly validate demand and supply plans. Those plans should identify required grid upgrades, delivery dates, funding and responsibility. It recommends approving additional load only after the necessary assets are commissioned and agreed technical and payment milestones are met.

The recommendations also distinguish promised alternatives from usable supplies. States would check whether renewable power, batteries or recycled water can actually serve a project when each phase opens. Three proposed checks make that distinction concrete:

• Count renewable and storage-backed reductions in grid demand only when approvals, contracts, connections, metering and deliverable capacity are confirmed.
• Deduct recycled or other non-drinking-water supplies from freshwater demand only when they are contracted, connected and available at commissioning.
• Assess peak-summer cooling demand and water availability at each commissioning milestone, including storage and contingency arrangements.

States retain the resource decisions

Water planning extends beyond the site boundary. The framework recommends a 20–30-year seasonal assessment of catchment supplies and competing demand, particularly agriculture. It says allocations should not reduce dependable supplies for existing users. Where basin stress rules out additional freshwater extraction, it recommends desalinated water where feasible and says projects should not further strain existing freshwater resources.

National guidance would still operate through state-level decisions. Regional governments have the final say on providing land, water and power, CNBC reported. The framework assigns national authorities standards and model guidance, while states coordinate infrastructure, set conditions and monitor delivery. It also recommends linking incentives to measurable outcomes, including domestic industry participation, skills and sustainable resource use.