India Prepares Data Center Policy as Big Tech Projects Face Local Backlash

Jitin Prasada, a junior minister for electronics and information technology, announced the plan and called India a 'fertile ground for hyperscalers,' according to CNBC. He reportedly said India wants to avoid a situation in which consumers pay more for power because they must compete with data centers for supply.

India is touted as one of the hottest markets for data centers, with several U.S. Big Tech companies investing to set up capacity in the country. Globally, data center companies are facing public backlash as communities raise concerns over electricity, water and land use. India is grappling with similar issues as it seeks to host more of the world's data.

Near Mumbai, residents worry that Amazon's data center would receive priority access to water and electricity during shortages, according to local media reports cited by CNBC. In Visakhapatnam, environmental activists have demanded the cancellation of permissions given to AI data centers where Google is constructing a $15 billion project.

Amazon told CNBC it is committed to being a 'good and responsible neighbor' and is engaging with the community through educational sessions. It denied using water for cooling and said its data centers 'do not draw electricity from the local distribution network that supplies homes, shops and businesses.' Amazon also said it 'will be a part of industry consultations with the government to advise on India's data center regulations.' Google did not respond to CNBC's request for comment.

Experts told CNBC the government plans to issue a policy directive to pacify local resistance to some projects and lay down clear approval guidelines that will reduce risks for data center developers from public pushback and execution challenges.

Jaspreet Singh, a partner at Grant Thornton Bharat, told CNBC the proposed policy marks a shift from 'primarily encouraging the data center investment' to balancing it with infrastructure readiness and sustainability.

Last week, government think tank Niti Aayog shared a framework for local governments to evaluate data center projects for sustainability and to provide suitable locations based on grid readiness and water supply availability, CNBC reported. It said guidelines should be established 'before constraints emerge' and that data centers should receive faster approvals only where resource readiness, local safeguards and public value are proven.

Experts involved in consultations expect the new policy to set clear and consistent rules, help the industry with land acquisition and simplify a fragmented approval process. 'India does not have a dedicated national policy for data centers, and it is high time that this gap was addressed,' Shobhit Agarwal, chief executive of real estate consultancy ANAROCK Capital, told CNBC. He said projects are currently approved under existing environmental and building rules, and every state has its own 'variations and incentives.'

India's central government has offered 20-year tax incentives to hyperscalers, but regional governments make final decisions on land, water and power, according to CNBC. Nikhil Narendran, a partner for technology at law firm Trilegal, told CNBC that local governments are proposing data center projects in locations already facing constraints in electricity, water and other infrastructure. He said state governments need to be encouraged to identify locations with reliable electricity, substantial cooling infrastructure, water availability and high-quality connectivity, 'rather than simply competing to announce large investments.'