States should evaluate natural resources before rushing for data centers: NITI Aayog

Workers and excavators work at the Amazon data center site in Thane. File. | Photo credit: Reuters

The assessment framework, jointly developed by NITI Aayog and Deloitte India, requires data center approvals to be linked to verified availability of electricity, water and other infrastructure, while requiring states to assess the economic benefits of projects against the public support they receive.

The document, published on Wednesday (Oct 14, 2026), comes amid rapid expansion in India’s data center industry. India had 271 data centers as of January 2026, according to a Council on Energy, Environment and Water (CEEW) report in February.

India’s installed data center capacity was approximately 1.57 gigawatts (GW) as of August 2026, according to the Union government. Industry estimates such capacity could reach 4.5-6.5 GW by 2030.

India’s data centers consumed approximately 13 terawatt hours (TWh) of electricity in 2024, equivalent to approximately 0.8% of India’s total electricity demand. Consumption is estimated to grow nearly fivefold to 57 TWh by 2030, or about 2.6% of demand, CEEW said.

States compete to attract investment. Maharashtra and Tamil Nadu are in the lead, while Gujarat and Uttar Pradesh have announced ambitious investment and capacity targets. Andhra Pradesh is looking to develop Visakhapatnam into a major hub for AI infrastructure. Odisha, Telangana and Madhya Pradesh are also looking to invest in data centers.

However, data center expansion has sparked local opposition over the water, electricity and land the data centers will require. In Maharashtra’ Thane, residents protested against a proposed Amazon data center, citing concerns about resource use and the facility’s proximity to homes, schools and hospitals. In Andhra Pradesh, a $15 billion data center project near Visakhapatnam has faced objections over water use and environmental concerns.

Large language models, the flagship products of AI companies, have advanced rapidly due to the accelerated addition of graphics processing units, which as a whole are extremely power-hungry and require large amounts of fresh water for cooling.

The NITI framework proposes a transition from approving individual projects to planning entire campuses and infrastructure corridors. It calls on states to prepare 20-30 year seasonal water availability assessments, protect existing users and ensure that developers finance network assets built exclusively for their projects.

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

The “Five Pillar Framework” also includes environmental safeguards, climate risks and governance. It proposes a central control mechanism with the Ministry of Electronics and Information Technology as the nodal ministry.

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

Published – 14 Oct 2026 20:28 IST