NITI Aayog has released a framework asking States to assess power, water, land, environmental sustainability, economic benefits and connectivity before approving data centre projects. The guidance comes as investment linked to India’s expanding artificial intelligence economy accelerates and States compete to attract large facilities.

The report, prepared with Deloitte India and developed through consultations with the Ministry of Electronics and Information Technology, the Ministry of Power and the Department for Promotion of Industry and Internal Trade, recommends assessing infrastructure readiness before approving capacity additions. It is intended to guide decisions rather than introduce a uniform regulatory layer.

States are advised to require developers, distribution companies and transmission utilities to prepare joint power-readiness plans covering electricity demand, sanctioned capacity, commissioning schedules and network upgrades. Additional capacity should be approved only after supporting infrastructure is commissioned and technical and payment milestones are met. Facilities above 20 MW should be ready for automated demand response and integration with State Load Despatch Centre systems, subject to grid-code requirements.

The framework also calls for renewable-energy and battery-storage arrangements to be verified before they are counted towards lower grid consumption. Data centres should report energy efficiency and emissions, reduce reliance on diesel generators and complete a 20-30-year seasonal assessment of water resources. Alternative supplies should be counted only when contracted, connected and available at commissioning, while desalinated water should be required where freshwater stress prevents further abstraction.

States are asked to measure projects’ net economic and fiscal contribution after government support, including land and infrastructure assistance and duty concessions. Incentives should be linked to commissioning, renewable-energy supply, resource efficiency, employment, domestic procurement and skills development. The framework also recommends data centre-ready zones, restrictions in environmentally sensitive areas, lifecycle plans for electronic waste and batteries, and digital single-window tracking of clearances. Common standards for power usage effectiveness (PUE), water usage effectiveness (WUE) and carbon usage effectiveness (CUE) are proposed to support monitoring across States.