NITI Aayog has released a new framework urging states to assess electricity, water, land and supporting infrastructure availability before approving data centre projects. The framework aims to help states attract investment while ensuring long-term sustainability as India’s digital infrastructure expands.
Titled Data Centre Evaluation Framework to Help States Plan for Sustainable Growth, the document was developed by the NITI Frontier Tech Hub and launched by NITI Aayog member Prof. Abhay Karandikar and CEO Anurag Jain.
The framework establishes five pillars for evaluating proposed projects: power and energy; water and cooling; siting and environmental sustainability; economic and strategic value; and policy, governance and implementation. It recommends that states assess each pillar before finalising data centre plans.
Power, Water and Infrastructure Assessments
Under the power and energy pillar, the framework recommends evaluating electricity demand across an entire data centre campus, including provisions for future expansion. States should also verify whether existing substations and transmission networks can accommodate the projected load.
For facilities exceeding 20 megawatts, it recommends readiness for automated demand response and integration with state load dispatch centre systems, subject to applicable grid-code requirements.
On water management, the framework calls for assessments of long-term availability, competing demand and potential impacts on existing users. It recommends preparing a 20–30-year seasonal catchment water balance that accounts for surface water, groundwater, municipal supplies, treated wastewater and competing requirements, particularly those of agriculture.
In water-stressed regions, states are advised to avoid placing additional pressure on freshwater resources. Where basin-level stress prevents further freshwater extraction, the framework recommends using desalinated water where feasible.
The document was prepared in collaboration with Deloitte India, with consultations involving the Ministry of Electronics and Information Technology, the Ministry of Power and the Department for Promotion of Industry and Internal Trade.
Environmental Risks and Suitable Locations
The framework recommends identifying designated zones for data centre development and prioritising locations with access to renewable energy and adequate connectivity, where this can reduce the need for long-distance power transmission.
It also proposes identifying high-risk or restricted development zones based on factors such as natural hazards, water scarcity, conflicting land uses and inadequate supporting infrastructure.
States are advised to consider future risks associated with coastal hazards, floods, cyclones, earthquakes, extreme heat and ecological sensitivity rather than relying solely on existing hazard maps.
Community impact assessments should examine potential effects on water availability, traffic, emissions, noise, waste management and local employment.
Incentives Linked to Measurable Economic Benefits
To ensure that data centre investments generate tangible economic benefits, the framework recommends assessing returns after accounting for state support and linking incentives to measurable outcomes.
These outcomes could include employment generation, domestic procurement, skills development, renewable energy adoption and resource efficiency. Payments and incentives should be tied to clearly defined milestones and verified results.
Karandikar said the framework was designed to support states in evaluating proposed projects, while several of its recommendations also address long-term planning requirements.
Digital System to Streamline Approvals
The framework also recommends establishing a digital single-window system to coordinate approvals and track project clearances, potentially improving administrative efficiency and transparency.
NITI Aayog clarified that the framework is intended to support state-level decision-making rather than impose a uniform development model or introduce an additional layer of regulation.
States can apply the common assessment principles according to their individual priorities, resource availability and development objectives, allowing them to balance digital infrastructure expansion with environmental protection and sustainable resource management.
