The Data Centre Evaluation Framework: NITI Aayog Report

Syllabus: GS3/ Science and Technology/Environment

Context

• NITI Aayog released a report called ‘The Data Centre Evaluation Framework to Help States Plan for Sustainable Growth’, which recommends assessing infrastructure readiness before approving capacity additions.
  • The report comes amid the rapid expansion of India’s data centre industry.

Recommendations

• Power Readiness Map: Developers, electricity distribution companies (DISCOMs) and state transmission utilities jointly prepare a Power Readiness and Ramp-up Plan before projects are approved.
  • This would detail total electricity requirements, sanctioned capacity, year-wise electricity availability, infrastructure upgrades and the agencies responsible for their implementation.
• Above 20 MW Requirement: For data centres with electricity requirements above 20 megawatts (MW), it proposes mandatory automated demand-response readiness and integration with State Load Dispatch Centres.
• A ‘five-pillar framework’ also covers environmental safeguards, climate risks, and governance. 
• It proposes a central audit mechanism, with the Ministry of Electronics and Information Technology as the nodal Ministry.
• The framework encourages States to plan infrastructure ahead of demand, identify resource constraints early and link incentives to measurable outcomes.
• The presentation does not say whether the framework has been formally adopted or whether its recommendations will be binding on States.

Data Centres in India

• India had 271 data centres as of January 2026, according to the Council on Energy, Environment and Water (CEEW).
  • The installed capacity of India’s data centres stood at about 1.57 gigawatts (GW) in August 2026.
  • By 2030, it is projected to hit 6.5 GW, which is a fourfold expansion in just four years. 
• Electricity demand from these facilities is expected to rise from about 13 terawatt-hours (TWh) in 2024 to roughly 57 TWh by 2030. 
• The Union Ministry of Power estimates that artificial intelligence alone will add 26.3 gigawatts of new demand by 2031-32.
• Most data centres are clustered around existing tech hubs of Mumbai, Hyderabad, Bengaluru, and the National Capital Region. These are precisely the places where water and grid stress are already most acute.

Concerns with Expansion of Data Centres

• Water Consumption: A 100 MW data centre consumes about 2 million litres of water daily. That is equivalent to the daily use of roughly 6,500 households.
  • India’s data centres consumed an estimated 150 billion litres of water in 2024-25. By 2030, that figure is projected to more than double to 358 billion litres annually.
• Water Stressed Regions: The water use matters because data centres are clustering in India’s most water-stressed regions. 
  • Rajasthan extracts 147.11% of its annual groundwater recharge, the second highest rate in the country. 
  • Several groundwater assessment units in Maharashtra are classified as semi-critical. 
  • Hyderabad’s surface water supply dropped 20% during the summer of 2024 due to poor monsoon recharge, forcing the water board to ration supply. 
• India’s power grid is already straining under record demand. India curtailed 300 GW-hours of renewable energy in the first quarter of 2026 alone, simply because the grid could not carry it.
  • Over the past five years, India has met only about 80% of its annual transmission targets. 
• Renewable Energy Challenges: Solar projects are being built faster than the wires to carry their power. This matters because data centres need reliable, uninterrupted electricity.
  • If renewable energy cannot reach them, the power will come from coal, adding to the burden of carbon emissions that India is trying to curtail.
• Rise in Surface Temperature: A study found that data centres raise land surface temperatures by an average of 2°C within a 10 km radius, with extreme cases reaching 9.1°C.
  • The study estimates that approximately 340 million people globally live within these affected zones.
• The Governance Gap: The data centre policies of various States offer generous incentives in the form of electricity duty exemptions, transmission charge waivers, stamp duty relief, and fast-track clearances.
  • None of the major State policies require a grid impact assessment before commissioning. 

Way Ahead

• Governments should introduce phased power and water use standards with enforceable benchmarks.
• A national AI Energy Star rating would let buyers and regulators compare how energy-efficient a facility or model actually is.
• A national sustainability framework: It would establish minimum standards for renewable energy sourcing, water consumption disclosure, grid impact assessment, and thermal load evaluation.
  • It would create a common set of expectations for investors and a common set of protections for consumers. 
  • It would also recognise that environmental constraints are economic constraints, and that ignoring them only creates larger costs later.

Conclusion

• The rapid adoption of AI worldwide is set to transform both the energy sector and the environment. 
• AI-driven data centres are projected to multiply electricity and water demand—raising concerns of higher CO₂ emissions, resource stress, and e-waste.
• AI also offers powerful solutions by enabling energy efficiency, renewable integration, and climate adaptation. 
• The challenge ahead lies in ensuring that AI’s energy-hungry growth is powered by clean, sustainable sources while leveraging its potential to build a greener, more resilient future.

Source: TH