Karnataka’s journey to green data centers
For four-year-old Johan Arun, who lives in Electronics City, the most recognizable vehicle is a water tanker. Every day when the vehicle arrives, Johan warns the family by announcing the arrival of “water in the tank,” his mother says.
The apartment where Johan and his family live is yet to get a Cauvery water connection like many others in the area. Tankers running up and down the roads are a familiar sight in this part of town.
Not far from there, Lakshmamma (name changed) runs a small tea shop. A native of Haveri, she migrated to Bengaluru 22 years ago. He has fond memories of the days when water was available 24×7. “It’s not like that anymore,” he says. As he speaks, a large water tanker arrives, parks along the curb, and begins pumping water into a huge facility near the tea house. A large compound wall with barbed wire stands between the imposing building and the sidewalk.
Lakshmamma explains who is the tall neighbor towering over her small shop. “It’s a data center. It was created about six years ago. It seems to need a lot of water. About 20 such tankers come there every day,” he adds.
Five in Electronics City
At least five data centers with a total capacity of more than 23 MW are currently located in Electronics City, according to government records. According to government data, there are 32 data centers in Karnataka, most of them located in and around Bengaluru. Major clusters include Electronics City, Whitefield and Devanahalli. Together, they are driving Karnataka’s artificial intelligence dreams.
However, data centers around the world have been in the eye of the storm as locals protested their environmental impact and governments reassessed their policies.
In India, the Government of Karnataka recently introduced the Sustainable Data Center Policy to create a globally competitive, sustainable and well-connected data center ecosystem in the state.
Impact on the environment
Specialized buildings that house servers, data centers used to power everyday online services like websites, email, instant messaging, and so on. Things started to change drastically when AI entered the picture. Specialized chips or GPUs used for training or running large AI models consume much more electricity.
“A traditional smaller-scale data center, used for web and standard IT applications, typically requires about 5 to 10 kW per rack. For a hyperscale data center with artificial intelligence, it can be 30 to 100 kW per rack,” explains Rishika Ranga, senior associate in CSTEP’s Energy & Power team.
More energy generates more heat. Cooling systems that prevent computers from overheating can use a lot of water when they rely on water cooling. In addition, electricity and water may be required for other functions such as lighting, power backup, security, cleaning and maintenance, and so on. Other impacts of data centers relate to possible noise pollution due to whirring machines, localized heat islands and so on.
Karnataka scenario
Of the 32 data centers, one is located in Mangaluru, one in Bidadi and the rest in Bengaluru. Official figures put the combined capacity of 18 of them at 292.27 MW. There is no government data on the capacity of the remaining 14; However, estimates put the total installed capacity of all data centers in the state at around 400 MW.
Water consumption of only 12 out of 32 data centers in Bengaluru is currently available with BWSSB. The rest potentially rely on alternative water sources such as private tankers.
According to BWSSB records, most of the 12 have adopted air-cooled and dry-cooling architecture, which helps keep water consumption lower than water-cooling infrastructure. The 12 data centers combined are estimated to use up to 1,964 KLD or 1.964 million liters of water per day at peak capacity. This corresponds to the daily water needs of approximately 3,600 households with four people.
Acknowledging the environmental costs of data centers, IT&BT Minister Priyank Kharge in March 2026 called data centers a “necessary evil” and announced plans to develop a sustainable data center policy. In September, the government approved the new Sustainable Data Center Policy 2026-2031.
New policy
The new policy seen by Hind aims to achieve a cumulative data center capacity of 1 GW (1,000 MW) in Karnataka by 2031 and encourages the adoption of renewable energy and treated water.
Data center units using renewable energy exceeding 50% of their total energy consumption will be eligible for an incentive of ₹0.50/unit for five years, irrespective of the source of energy purchase, subject to an overall ceiling of ₹1.25 crore.
Charges incurred in connection with procurement and use of treated water will be fully reimbursed subject to a maximum of ₹8 lakh per annum. The incentive is valid for a period of five years from the date of commencement of commercial operations.
The policy also mandates the reporting of energy use efficiency (PUE) and water use efficiency (WUE) for the plant.
PUE is the ratio of a data center’s total energy consumption to the energy consumed by its IT equipment. WUE is the amount of water used by a data center per kilowatt-hour of energy consumed by its IT equipment. For both metrics, a lower value means higher efficiency.
While data centers achieving a PUE of 1.00 to 1.20 will receive a one-time financial incentive of ₹ 20 million to be paid in the fourth year after consistently demonstrating the prescribed PUE for three consecutive years, those units that maintain a WUE ≤ 0.7-1.3 L/kWh for at least three consecutive years will be reimbursed up to 10% for water. ₹ 30 lakhs per annum for two consecutive years.
As per the policy, the government will also undertake mapping of water and power availability and usage in existing and proposed data center locations in the state.
“The exercise is basically to map out where power can be conveniently supplied etc. Water is not the main issue, so we are mainly focusing on energy and land availability. Wherever we can mobilize power, it will be on the map. Then we can explore whether there is land, suitable connectivity etc. and we can work on it. It will be like a guide for investors who want and will invest in data centers, Minister, Manjula, Electronic. IT, Biotechnology and Science and Technology and Chairman BWSSB.
Policies in line with sustainability
With the current capacity in the state at around 400MW and the policy targeting 1GW by 2031, Manjula says the government is careful not to be too ambitious. “We will go step by step and realize that we are not only focusing on increasing capacity, but also on sustainability. The intention is also to see if one good data center project can be facilitated in the coastal area. Then it will also be the center of future growth,” he explains.
Shylesh Muralidharan, a sustainability expert and Senior Fellow at the Portulans Institute, called the policy one of the most sustainable policies he has come across in India. “It’s the first I’ve seen to combine water efficiency, water treatment incentives and heat source mapping with tax credits,” he notes. “Refreshingly, sustainability is directly linked to financial incentives. To offer up to ₹20 crore to a data center that maintains a PUE of 1.20 or below, along with covering the full cost of treated water for five years in a water-stressed metro, is using the right levers,” says Muralidharan.
A strong point of the policy, he said, is the commitment to map the availability of water and electricity across the state to guide the location of projects.
Srinivas Varadarajan, CEO of Mysuru-based Vigyanlabs, whose services include micro data centers, also welcomes the policy, calling it the right approach.
Based on incentives
While the intent of the policy has been welcomed, some concerns remain that it relies on incentives rather than mandating the use of clean energy or treated water.
Noting that efficiency per unit of calculation is different from total water used, Muralidharan notes, “While Karnataka’s overall renewable base and state-level water metrics are strong, local realities differ—for example, dry wells around Bengaluru. Water stress is a watershed and neighborhood-level issue, and I hope the resource heat map includes that level of granularity.”
WELL Labs research shows the importance of detailed level data.
The team, including hydrologist Shashank Palur, calculated the water consumption of data centers in Bengaluru based on secondary literature. It was found to be only a small fraction of Bengaluru’s total water consumption.
However, the devil is in the details. Because in Bengaluru, says Palur, data center water consumption is not a macro problem, but a hyper-local problem.
“If you just look at the numbers, it doesn’t seem like a big problem. But the problem is the location of the data centers. Most of the data centers are in areas that don’t have piped water. They’re basically taking groundwater from wells or buying from tankers. That puts them directly in conflict with villages or smaller towns that depend on drinking water.
While treated water is an alternative, there is currently no publicly available data on how many data centers use it.
Transparent mechanisms
This underscores the need for a more transparent monitoring and reporting mechanism that mandates data center operators to publish consumption data.
“It (the new data center policy) generously rewards good behavior once a project is up and running, but does not yet require a project to disclose its water and energy usage before approval. Incentives for good behavior and imposing transparency before operations are different tools, and a policy of this scale would benefit from effective use of both,” notes Muralidharan.
Another limitation is relying only on metrics like PUE and WUE, which do not give an idea of the percentage of clean energy or treated water used by data centers.
“The PUE they use as an efficiency metric is just an industry standard ratio… It doesn’t tell me how much energy the data center is consuming. It also ignores the carbon intensity of that energy consumed,” explains Ranga. “We need clear efficiency standards, not just general guidelines. We need something more specific about what happens when data centers don’t meet those efficiency standards,” he adds.
Muralidharan suggests that data center operators be required to make full disclosures, including anticipated water consumption, energy consumption and network upgrades, before approval. He also feels that the time may be right to come up with better metrics.
Alternative approaches
Vigyanlabs’ Varadarajan notes that there is no need to build large data centers at every location. “The global assumption has been that data centers have to be large to be economically viable and efficient. But 80% of the countries in the Global South are smaller countries that mostly require smaller data centers. The industry says smaller ones are not efficient, but that’s because of how they’ve traditionally been designed,” he says.
According to him, Vigyan Labs redesigned the building and components, including using sustainable bricks, reducing cement consumption by 70% and developing more efficient air-cooled chillers instead of water-cooled ones. “We have also developed a proprietary, fully air-cooled FEMTO server for AI and heavy computing tasks that uses less than half the power of comparable systems.”
According to him, the result is 70% lower electricity consumption, half the space requirement and zero water consumption for the same workload.
While not ruling out the need for hyperscale data centers, it calls for a rethinking of data center design and sizing based on real needs, with sustainability prioritized over greenwashing, regardless of scale.
“Overall, Karnataka should move forward in expanding its data center infrastructure given the real demand and strong renewable base,” suggests Muralidharan.
“A policy that is so thoughtful about rewarding efficiency can be just as thoughtful about mandating transparency before construction begins. Projects that can withstand disclosure will move faster with the community as a partner. Karnataka has done most of this choice well, and incorporating early transparency would complete the framework.”