States should evaluate natural resources before pitching for data centres: NITI Aayog

An evaluation framework jointly developed by the NITI Aayog and Deloitte India calls for data centre approvals to be linked to verified availability of electricity, water and other infrastructure, while requiring States to assess the projects’ economic benefits against the public support they receive.

The document, made public on Wednesday (October 14, 2026), comes amid the rapid expansion of India’s data centre industry. India had 271 data centres as of January 2026, according to a February report by the Council on Energy, Environment and Water (CEEW).

The installed capacity of India’s data centres stood at about 1.57 gigawatts (GW) in August 2026, according to the Union government. Industry estimates project that such capacity could reach 4.5-6.5 GW by 2030.

India’s data centres consumed approximately 13 terawatt-hours (TWh) of electricity as of 2024, equivalent to about 0.8% of India’s total electricity demand. Consumption is projected to rise nearly fivefold to 57 TWh by 2030, or about 2.6% of demand, according to the CEEW.

States are competing to attract investments. Maharashtra and Tamil Nadu are in the lead, while Gujarat and Uttar Pradesh have announced ambitious investment and capacity targets. Andhra Pradesh seeks to develop Visakhapatnam into a major artificial intelligence infrastructure hub. Odisha, Telangana and Madhya Pradesh are also pursuing data centre investments. 

However, the expansion in data centres has triggered local opposition over the water, electricity and land the data centres will require. In Maharashtra’ Thane, residents protested against a proposed Amazon data centre, citing concerns over resource use and the facility’s proximity to homes, schools and hospitals. In Andhra Pradesh, Google’s proposed $15-billion data centre project near Visakhapatnam has faced objections over use of water resources and ecological concerns.

Large Language Models, flagship products of AI companies, have rapidly progressed due to the accelerated addition of graphics processing units that, in their totality, are extremely power hungry and require very large quantities of freshwater for cooling. 

The NITI framework proposes moving from project-by-project approvals to planning for entire campuses and infrastructure corridors. It calls for States to prepare 20-30-year seasonal assessments of water availability, protect existing users, and ensure developers fund grid assets built exclusively for their projects.

States must pitch economic benefits after accounting for land, infrastructure, utility concessions, and other State support. Incentives could be tied to measurable outcomes, including employment, renewable energy use, efficiency and local procurement, the document noted.

A ‘five-pillar framework’ also covers environmental safeguards, climate risks, and governance. It proposes a central audit mechanism, with the Ministry of Electronics and Information Technology as the nodal Ministry.

The presentation does not say whether the framework has been formally adopted or whether its recommendations will be binding on States.