India Moves to Regulate Data Centers as Local Backlash Over Water and Power Grows

U.S. Big Tech companies spending billions on digital infrastructure in India are encountering rising public resistance over resource sharing and environmental concerns, prompting the government to step in. On Oct. 14, junior electronics and IT minister Jitin Prasada announced that India will roll out a data center policy, calling the country a "fertile ground for hyperscalers." He reportedly said India wants to avoid a situation where consumers pay more for power because they must compete with data centers for supply.

Globally, data center firms face similar pushback as communities raise concerns over electricity, water and land use. In India, local media reports say Amazon's data center near Mumbai is meeting resistance from residents worried the facility would get priority access to water and electricity during shortages. Environmental activists are demanding the cancellation of permissions granted to AI data centers in Visakhapatnam, where Google is building a $15 billion project.

Amazon told CNBC it is committed to being a "good and responsible neighbor," engages the community through educational sessions, denies using water for cooling, and said its data centers "do not draw electricity from the local distribution network that supplies homes, shops and businesses." The company added it will take part in industry consultations on India's data center regulations. Google did not respond to CNBC's request for comment.

Experts told CNBC the government plans a policy directive to calm local resistance and set clear approval guidelines that reduce risks for developers. Jaspreet Singh, partner at Grant Thornton Bharat, said the proposed policy signals 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 projects for sustainability and identify suitable locations based on grid readiness and water supply, stressing the need for guidelines "before constraints emerge."

Shobhit Agarwal, chief executive of ANAROCK Capital, told CNBC that India lacks a dedicated national data center policy and that projects are currently approved under existing environmental and building rules, with each state having its own "variations and incentives." While the national government has offered 20-year tax sops, regional governments make the final decisions on land, water and power. Nikhil Narendran, a technology partner at law firm Trilegal, said states should identify locations with reliable electricity, cooling infrastructure, water and connectivity "rather than simply competing to announce large investments."

Source: CNBC