India is in the middle of a data centre gold rush. Global tech giants — Google, Meta, Amazon, Microsoft — have committed billions to build facilities across the country. The government estimates that data centres will drive nearly $200 billion in investment over the coming decade.
Many States in the country are competing fiercely for a piece of the pie. Maharashtra wants to be the data centre capital of the country. Telangana has declared data centres as “essential services.” Karnataka is reviewing its policy to attract more. Rajasthan is offering tax exemptions and cheap land. All eyes are on the opportunity, but none on the cost.
Data centre capacity in India has nearly tripled from 520 megawatts in 2020 to nearly 1.5 gigawatts today. By 2030, it is projected to hit 6.5 GW, which is a fourfold expansion in just four years. Electricity demand from these facilities is expected to rise from about 13 terawatt-hours (TWh) in 2024 to roughly 57 TWh by 2030. The Union Ministry of Power estimates that artificial intelligence alone will add 26.3 gigawatts of new demand by 2031-32.
No policy document, at the Central or State level, has assessed what guaranteed power costs the grid that is already strained under 45°C heat, or where the water will come from for cooling, or what the thermal load from thousands of servers will do to regions already teetering on dangerously high temperatures.
The resource reality
A 100 MW data centre consumes about 2 million litres of water daily. That is equivalent to the daily use of roughly 6,500 households. India’s data centres consumed an estimated 150 billion litres of water in 2024-25. By 2030, that figure is projected to more than double to 358 billion litres annually.
The water use matters because data centres are clustering in India’s most water-stressed regions. Rajasthan extracts 147.11% of its annual groundwater recharge, the second highest rate in the country. Several groundwater assessment units in Maharashtra are classified as semi-critical. Telangana’s Irrigation Minister confirmed in May 2026 that 16 districts were under groundwater stress. Hyderabad’s surface water supply dropped 20% during the summer of 2024 due to poor monsoon recharge, forcing the water board to ration supply. Mumbai’s reservoirs stood at just 44.5% of capacity in March 2026.
The water these facilities consume is not accounted for in any State policy. None of the policies require public disclosure of daily water consumption. None require a hydrogeological assessment before approval. None mandate that water sourcing must not compete with agriculture or municipal supply.
The electricity situation is equally concerning. India’s power grid is already straining under record demand. Maharashtra’s peak power demand hit 27,230 MW in April 2026, the highest ever handled by the State utility. Two-year waits for 220 kV grid interconnections across the country are already lengthening project timelines.
Transmission constraints are also becoming a critical bottleneck. India curtailed 300 GW-hours of renewable energy in the first quarter of 2026 alone, simply because the grid could not carry it, according to an analysis of Central Electricity Authority data by Ember Energy, a specialised consultancy. Over the past five years, India has met only about 80% of its annual transmission targets. One in four major transmission schemes is running a year or more behind schedule. As a result, 20 GW of renewable energy capacity faces connectivity delays of more than four months.
Rajasthan and Gujarat, which house the bulk of India’s utility-scale solar and wind, face the longest queues at pooling stations. The problem has become structural in the country. Solar projects are being built faster than the wires to carry their power. This matters because data centres need reliable, uninterrupted electricity. If renewable energy cannot reach them, the power will come from coal, adding to the burden of carbon emissions that India is trying to curtail.
The heat they generate
Data centres do not just consume power and water. They also generate heat. And that heat makes the places around them hotter. A March 2026 study from the University of Cambridge, analysing 20 years of NASA satellite data, found that data centres raise land surface temperatures by an average of 2°C within a 10 km radius, with extreme cases reaching 9.1°C. The study estimates that approximately 340 million people globally live within these affected zones.
This is not a distant problem. Mumbai’s land surface temperature has already risen from 40.9°C in 2003 to 47.3°C in 2023, an increase driven largely by urbanisation and heat-trapping infrastructure. Hyderabad’s urban heat island intensity ranges from 5.74°C to 6.82°C, even as its urban area doubled between 2001 and 2020. The city recorded temperatures above 43°C in the summer of 2024.
The Cambridge finding creates a feedback loop. Data centres generate heat. That heat raises ambient temperatures. Higher ambient temperatures increase cooling demand. Increased cooling demand raises electricity consumption. Higher electricity consumption, unless fully renewable, increases emissions. And those emissions contribute to the very climate change that is making India hotter in the first place.
The governance gap
The data centre policies of various States offer generous incentives in the form of electricity duty exemptions, transmission charge waivers, stamp duty relief, and fast-track clearances. But they impose virtually no conditions. None of the major State policies require a grid impact assessment before commissioning. None require mandatory renewable energy sourcing. None require thermal load assessment for surrounding communities.
Telangana’s policy is particularly revealing. It classifies data centres as “essential services,” guaranteeing them uninterrupted power even during shortages. In a State where 16 districts face groundwater stress and temperatures have reached 47°C, this is a policy choice with direct consequences.
Maharashtra’s policy originally required 100% renewable energy for core operations. In June 2026, the State reduced that requirement to 51%, a dilution framed as improving project viability.
Gujarat’s new Data Centre Policy 2026-29 mandates at least 51% green energy sourcing. Karnataka’s IT minister told the State Assembly in March 2026 that the State was reviewing its policy over water and energy concerns. Tamil Nadu has linked incentives to renewable compliance. But these are exceptions, not the norm. And even where mandates exist, enforcement and verification remain weak.
“There is a risk that a significant part of the associated infrastructure cost could eventually be socialised,” said Vibhuti Garg, Director, South Asia at the Institute for Energy Economics and Financial Analysis (IEEFA), a think tank. “Where broader grid infrastructure is required, government support or appropriate financing mechanisms could help ensure that the cost is not simply transferred to consumers through higher electricity tariffs.”
“Governments should introduce phased power and water use standards with enforceable benchmarks,” said Prateek Aggarwal, Senior Programme Lead at Council on Energy, Environment and Water, a Delhi-based think tank. “A national AI Energy Star rating would let buyers and regulators compare how energy-efficient a facility or model actually is.”
What needs to change
India’s generation pipeline can absorb the additional demand from data centres. The Union Ministry of Power says capacity is not the constraint. The constraint is market design and transmission infrastructure.
Aggarwal argued that “India needs climate-intelligent power markets that price grid services separately, where short-term markets pay for ramping, storage, and demand response.” Ember’s analysis points to another near-term solution in the form of battery storage at renewable pooling stations. Roughly 3-4 GW of two-hour storage could have absorbed most of the curtailed generation in early 2026, according to its calculations. The technical pieces are in place but the gap is regulatory and commercial.
IEEFA has suggested that coastal locations offer advantages such as proximity to near-shore wind and solar, and access to seawater for cooling without desalination. But for now, most data centres are clustering around existing tech hubs of Mumbai, Hyderabad, Bengaluru, and the National Capital Region. These are precisely the places where water and grid stress are already most acute.
A national sustainability framework would help. It would establish minimum standards for renewable energy sourcing, water consumption disclosure, grid impact assessment, and thermal load evaluation. It would create a common set of expectations for investors and a common set of protections for consumers. It would also recognise that environmental constraints are economic constraints, and that ignoring them only creates larger costs later.
Data centres are not optional. They are critical infrastructure for India’s digital future. The question is not whether India should build them. The data centres will be built. It remains to be seen whether they will be built in a way that protects India’s water, power grid and climate, or in a way that leaves future generations to pay the bill.
(Soumya Sarkar is an independent journalist based in New Delhi and Kolkata)
