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Information TechnologyOctober 20264-5 min

Does India Need a National Data Centre Sustainability Policy?

A principles-based national framework could close the gap between digital ambition and local water and power limits.

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Does India Need a National Data Centre Sustainability Policy?

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1Introduction 2Context: Where Data Centre Policy in India Stands?3Data Centre Policy India: The Case for a National Framework 4Constructive Insights: Design Principles for a National Framework 5Conclusion 6Frequently Asked Questions

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Introduction

Part 01

In August 2026, the Union Environment Ministry told the Rajya Sabha that AI data centres do not, by themselves, require environmental clearance, according to press reports of the reply. For a sector that depends on large volumes of power and, in many designs, water, that is a notable position.

India's data centre capacity grew from 375 MW in 2020 to about 1,575 MW, the Union government said in August 2026, and CEEW and Systemiq cite forecasts of 4.5 to 6.5 GW by 2030. Yet India still has no binding national data centre policy.

This article argues that India needs a principles-based national data centre sustainability framework, with binding disclosure and local water and grid safeguards, that sits alongside state policies rather than replacing them.

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Context: Where Data Centre Policy in India Stands?

Part 02

A draft national data centre policy from the Ministry of Electronics and Information Technology (MeitY) in 2020 was never notified. Central support has come through other routes, including infrastructure status for data centres above 5 MW in 2022 and a long tax holiday announced in Budget 2026, according to CEEW.

States have filled the gap. CEEW and Systemiq count 15 states with dedicated data centre policies or related frameworks, of which only five explicitly include sustainability provisions. Karnataka's Sustainable Data Centre Policy 2026-31, approved in September 2026, monitors power and water usage effectiveness and plans to map water and energy availability across locations before further expansion.

Views differ. Arguments against a national policy usually centre on speed, cost and state autonomy, while civil society groups point to unpublished water and energy figures. CEEW reports that most stakeholders it consulted support a national green data centre framework existing alongside state policies.

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Data Centre Policy India: The Case for a National Framework

Part 03

The gap is a planning problem, not only a rules problem

Andhra Pradesh's policy targeted up to 1 GW over its period, while its IT minister told the Assembly in August 2026 that allocations had been secured for a proposed 6.5 GW ecosystem, according to press reports. Pipeline figures are not installed capacity, but the gap suggests state targets and investment commitments can drift apart without a shared planning baseline.

Incentives reward arrival, not performance

Infrastructure status and tax holidays lower the cost of building. CEEW describes state policies as prioritising investment attraction over performance outcomes, and national guidance as largely limited to enabling measures. In this view, public support should come with public disclosure.

Local limits are not national averages

A data centre draws on one river basin and one grid. A national framework should therefore set a common baseline and require site-level safeguards, such as a disclosed water source and a confirmed power connection, rather than a single national cap. Karnataka's plan to map water and energy availability shows that site-level safeguards can be built into state policy.

Counterargument: cost and competitiveness

Compliance costs matter, and India competes for investment. But clear, uniform rules can reduce uncertainty for developers who now face different expectations in each state, and investors are already asking for the same data.

Counterargument: federalism

Water is a state subject and electricity is on the Concurrent List, so a national policy cannot override local control. It does not need to: a framework that sets baseline disclosure and principles, with states deciding incentives and local limits, respects that division.

Counterargument: technology neutrality

Rules that mandate specific cooling or power technology age quickly. Outcome-based requirements, such as published PUE, WUE, water source and renewable share, stay valid as technology changes, and Indian standards for several of these metrics already exist.

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Constructive Insights: Design Principles for a National Framework

Part 04

Set a baseline, not a ceiling

Require disclosure above a defined capacity threshold of energy use, power and water usage effectiveness, water source and renewable share, using standards already adopted in India. A published baseline gives regulators, investors and communities the same facts to work from.

Tie siting to local resources

Ask for confirmation of water source and power connection before approval, in the way Karnataka plans to map availability by location. That also protects developers from late-stage disputes over water or power.

Link incentives to performance

Connect central and state incentives to disclosed performance, so that public support follows results. Where a state already links incentives to efficiency, the national framework can reinforce that practice rather than duplicate it.

Phase and review

Phase thresholds by capacity and review the framework regularly as technology and evidence change. A review point gives industry time to adapt and lets regulators correct course.

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Conclusion

Part 05

India does not lack data centre ambition or state-level activity. It lacks a shared baseline for energy, water and local safeguards, and a principles-based national framework would supply it without displacing the states.

As capacity multiplies towards the end of the decade, the policies adopted now will decide whether growth is planned around local water and power or discovered afterwards through disputes.

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Frequently Asked Questions

Part 06

Does India have a national data centre sustainability policy?

No, a 2020 MeitY draft was never notified, and sustainability provisions appear in only some state policies.

Why does India need data centre regulation, and how can it attract investment sustainably?

Capacity is growing quickly and impacts on water and power are local, so clear, uniform disclosure and siting rules can protect local resources while reducing uncertainty for investors.

What should an Indian data centre sustainability policy cover?

Disclosure of energy, water and renewable share, siting safeguards for local water and power, and incentives linked to performance.

Should data centres have water-use limits?

A single national limit would ignore local conditions, so site-level approvals tied to local water availability, with published water-use data, are the stronger approach.

Should data centre standards be national or state-specific?

A national baseline with state-level incentives and local limits respects state authority over water and power while giving developers consistent expectations.

Key Takeaways

India has no binding national data centre policy, and sustainability provisions appear in only some state policies.
Current incentives lower the cost of building, but they do not require published energy or water performance.
A principles-based national baseline can sit alongside state policies without overriding state control of water and power.
Binding disclosure and site-level water and grid safeguards matter more than a single national cap.

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