With India’s data centre capacity set to rise sevenfold to 10 GW by 2030, robust frameworks are essential to avert long‑term strains on power, water, and infrastructure, argue Anupam Varma and Aditya Gupta.
There is a particular kind of darkness that descends upon a city when the power fails, not the romantic darkness of a candle’s amber warmth, but the sudden, disorienting black of a server going cold, a transaction frozen mid-air, a hospital monitor blinking out. As India today stands at the threshold of a digital transformation of staggering proportions and ambition by doubling down on investments in data centres, it risks building these without first laying the foundations. The regulators who govern the nation’s electricity, water, and infrastructure sit largely unprepared.
India’s installed data centre capacity has nearly tripled since 2020, reaching 1.5 GW in 2025, and is projected to increase nearly 7x to touch 10 GW by 2030, requiring an additional 40 to 45 TWh of power annually by 2030. A GPU server rack built for AI consumes
between five and six times as much power
as a conventional server rack. A single hyperscale campus, the kind that Google or Microsoft is building in Visakhapatnam or Pune, can draw 100 MW or more from the grid, as much as a small city.
The Union Budget 2026-27 announced a tax holiday extending to 2047 for foreign companies providing cloud services from Indian soil, alongside safe harbour provisions for global technology giants. Investments already committed or announced cross $160 billion.
Structural Challenges
Beneath the ambition lie three structural challenges that need to be resolved. First is power. India’s Electricity regulators, the State Electricity Regulatory Commissions (SERCs) that govern power distribution across every state, were created in another era and for another purpose, i.e., distancing the government from matters of tariff, managing subsidised agricultural tariffs, mediating between cash-strapped distribution companies and an electricity-hungry public, ensuring that the lights stayed on in the village as much as in the factory. They were not envisioned to grapple with a hyperscale cloud facility demanding
100 MW of uninterrupted, continuous and reliable power, round the clock, with tolerances so fine that a small fluctuation may have disastrous consequences. Continuity and reliability of power supply have acquired greater significance. Transmission and distribution losses stood at 16.64 per cent in FY2023-24. During peak summer months, industrial supply is regularly curtailed.
The second is water. Here, the regulatory silence is even more deafening. A data centre consuming 1 MW of power will, in India’s climate, use somewhere between 25 and 30 million litres of water annually for cooling; a figure that compounds mercilessly as facilities scale. The sector as a whole already consumes an estimated 150 billion litres of water each year, a number set to more than double by 2030. The bitter irony is that India’s great data centre cities, Mumbai, Chennai, Hyderabad, Bengaluru, Delhi-NCR, are also among its most water-stressed. No state electricity regulator has addressed the water-energy nexus in data centres. Companies make elaborate promises about water neutrality and closed-loop recycling; promises that, in the absence of mandatory, independently verified reporting, are difficult to distinguish from marketing.
The third is geographic concentration. Over 70 per cent of India’s data centre capacity is clustered in Mumbai and Chennai alone. Land near substations in these metros is scarce and expensive. The concentration creates localised grid stress.
Global Lessons
One need not look far for a warning of what inaction produces.
Ireland found itself the unwitting host of half the continent’s digital infrastructure, drawn by low taxes and a cool climate. By 2024, data centres consumed 22 per cent of Ireland’s entire national electricity. The country’s Commission for Regulation of Utilities put in place connection criteria so restrictive that the effect, for nearly four years, was a de facto moratorium on new data centre grid connections in Dublin. The government was forced to commission emergency gas generators. Ordinary Irish households found their electricity bills rising, in part to fund grid upgrades that largely benefited data centre developers.
The lesson that Ireland’s regulator
eventually learned, and codified in December 2025, in a landmark decision that ended the moratorium, is one India’s regulators would do well to absorb before the crisis arrives rather than after: that a data centre is not a large factory. It is a distinct class of energy user, characterised by a flat, relentless, and geographically concentrated load profile, governed by its own unique set of rules.
The US is confronting the same issues. The Federal Energy Regulatory Commission (FERC) has imposed upon itself a June 2026 deadline to roll out a regulatory framework governing how AI-driven data centres and other large loads connect to the interstate transmission grid. The US Department of Energy Secretary directed FERC to assert jurisdiction over the interconnection of loads exceeding 20 MW, arguing that standardised, rapid interconnection for AI data centres has become an urgent matter of national security. The commission may also direct who pays for the grid upgrades.
Ireland’s solution is instructive. New data centres seeking grid connections must now be accompanied by dispatchable on-site generation or battery storage that matches their full import capacity. They must source 80 per cent of their annual electricity from renewable energy within a six-year glide path. They must participate in the wholesale electricity market, feeding energy back into the grid when the system needs it. In short, they are no longer merely consumers; they are grid actors, with responsibilities as well as privileges.
India’s Policy Moves
In India, the most relevant parallel comes from the telecom sector. Long before data centres became the focus, TRAI issued a detailed consultation paper on the regulatory framework needed to support data centres, content delivery networks, and interconnect exchanges. It proposed a unified licensing regime, the creation of Data Centre Economic Zones, and even a national DC Readiness
Index to rank states by their suitability, assessing, among other things, power availability and grid reliability. The Telecom Regulatory Authority of India (TRAI) understood that this new class of infrastructure would demand a new class of governance.
The draft National Data Centre Policy,which the Ministry of Electronics and Information Technology released in 2020,
was never notified.
India’s electricity commissions, responsible for the single most critical input that data centres require, have produced no equivalent. Not one SERC has issued a consultative paper on data centres. Most still classify these gigawatt-hungry facilities under the generic heading of ‘High Tension (HT) Industrial’ or ‘HT Commercial’.
States, including Telangana, Tamil Nadu, Odisha and Uttar Pradesh, actively support data centre development through dedicated policies or broader IT and industrial policy frameworks. These state-level policies in India prioritise investment attraction over performance outcomes and offer incentives such as a subsidy on electricity duty, exemption on wheeling charges, subsidised land, etc.
Faced with investment pledges in Visakhapatnam requiring upwards of a gigawatt of power, the Andra Pradesh state government announced that private firms with a power requirement exceeding 300 MW could apply to the Andhra Pradesh Electricity Regulatory Commission for their own distribution licence allowing them to procure electricity directly from generators through power purchase agreements, bypassing the state distribution companies entirely. Google became the first private company in the state to receive such a licence, for a $15 billion investment across three campuses.
Closing Regulatory Gaps
The demand response potential of data centres, whose backup battery systems and flexible workloads could, with the right regulatory framework, function as virtual
power plants balancing the grid at moments
of stress, remains entirely unexplored in the Indian regulatory firmament. There is no coordination between electricity regulators, water authorities, environmental bodies, and the Ministry of Electronics and Information Technology, which is essential for any solid data centre policy framework.
The Electricity Act of 2003 permits multiple distribution licensees to operate in the same geographic area. The Andhra Pradesh model is not unlawful. But it raises questions that no regulator has yet answered with any rigour.
First is financial. A 300-MW consumer exiting the distribution company’s portfolio is not a minor inconvenience. It is the departure of one of the most valuable accounts on the books, a large industrial consumer whose high tariff has historically cross-subsidised cheaper supply to farmers and households. When these consumers leave, either through open access or, more completely, through a distribution licence of their own, the burden of subsidisation falls more heavily on those who remain.
Second is one of the grid governance. The state transmission network now carries power for a private licensee on wheeling charges. If those charges are set too low, the public infrastructure is in effect subsidising
private profit.
The third question is jurisprudential. Distribution is not mere network operation; it requires the actual supply and sale of electricity to consumers. A data centre holding a distribution licence but using all its power internally may find this legal architecture tested in the near future.
Fourth is the manner in which the same would be implemented. The state government, by a Policy does not have the power to direct the SERC to grant distribution licenses. The same is the sole prerogative of the latter. Therefore, it would have to be seen what conditions are imposed by the
SERC when these companies apply for a distribution license.
Building Robust Frameworks
What, then, must India’s electricity regulators do, and with some urgency?
The task is neither impossible nor without precedent. It begins with recognition, the formal acknowledgement, through consultative papers and regulatory orders, that a data centre is a distinct class of energy consumer that demands its own regulatory treatment. This means, at minimum, creating a dedicated tariff category that reflects the true cost of serving a 24×7 baseload consumer with near-perfect quality-of-supply requirements, and pricing that service honestly, rather than treating it as any other industrial consumer. It means amending load forecasting regulations to require distribution companies and state transmission utilities to survey, project, and plan for hyperscale demand in their areas of supply. While load forecasting obligations exist on paper, today, there is no obligation on distribution companies (discoms) to survey or separately project data centre demand. It means developing fast-track approval frameworks for the substation and transmission infrastructure that these facilities require, so that the gap between investment announcement and actual power availability does not become the issue it has sometimes been for industrial parks.
The round-the-clock renewable energy framework, which allows a data centre to procure green power matched hour by hour against its consumption, rather than merely buying certificates on paper, exists at the central level in nascent form but has not been meaningfully harmonised by state regulators.
The opportunity that India’s data centre moment represents is real and transformative. A country that can credibly offer hyperscale operators reliable power, sustainable water, and a coherent regulatory environment will capture a share of the global AI infrastructure supply chain that could define its industrial trajectory for a generation. The Union Budget’s tax holiday is a declaration of intent. But intent without infrastructure is a promissory note drawn on an empty account. India’s regulators must now conceptualise and do the technical and essential work of making good on that
promise. The investment will not wait indefinitely. Ireland learned this the hard way, spending a billion euros to fix what a decade of foresight might have cost a fraction of that sum. India, with its grids already strained and its cities already thirsty, cannot afford to learn the same lesson twice.
About the author
Anupam Varma and Aditya Gupta are specialist Dispute Partners at JSA Advocates & Solicitors, handling complex regulatory and policy issues in
the energy sector.