Green data centres in India: policy meets practice
Sushant Shetty
Fox Mandal & Associates, Mumbai
Meghna Chandra
Gentari (Petronas), Gurugram
India’s data centre market is expanding rapidly, supported by cloud services, artificial intelligence (AI), fintech, digital public infrastructure and data localisation expectations. The legal issues surrounding this growth are also becoming more complex. A data centre is not merely an IT facility; it requires substantial land, continuous power, cooling systems, connectivity, construction approvals and operational permissions. Regulation of the sector therefore now cuts across information technology, electricity, renewable power procurement, environmental compliance and state industrial policy.
India does not yet have a dedicated central law on green data centres. The applicable framework is spread across central policy proposals, state data centre policies, electricity laws, renewable energy rules, building approvals, environmental permissions and environmental, social and governance (ESG) requirements. This makes location an important legal and commercial decision. Land acquisition, power cost, renewable energy access, incentive eligibility, approval timelines and continuing compliance can vary materially from one state to another.
Central framework
At the central level, the Ministry of Electronics and Information Technology has considered a national data centre policy to promote investment, simplify approvals and recognise data centres as critical digital infrastructure. While a final consolidated policy is yet to be notified, the draft framework remains relevant in understanding the Ministry’s intended policy approach.
It contemplates infrastructure status, single-window clearances, data centre economic zones, domestic equipment manufacturing and support for energy-efficient facilities.
Several central laws remain relevant even though they are not data centre specific. The Energy Conservation Act 2001 and the framework administered by the Bureau of Energy Efficiency are relevant for energy efficiency and building performance. The Electricity Act 2003, open access regulations, renewable purchase obligations, renewable consumption obligations, and captive or group captive generation rules may directly affect power procurement structures.
Separately, the Digital Personal Data Protection Act 2023, together with sectoral data localisation requirements and domestic storage expectations in certain regulated sectors, is likely to increase demand for Indian data centre capacity, which makes sustainable growth more important.
State data centre policies
State policy has a decisive role in data centre development in India. States compete for projects by offering land support, electricity duty concessions, stamp duty benefits, single-window clearances, infrastructure facilitation and power-related incentives. In practice, the success of a project often depends as much on state-level implementation as on the central legal framework.
Maharashtra is a useful illustration of this trend. The Maharashtra IT/ITES Policy 2023 recognises data centres and data centre parks as focus areas and provides for registration, incentives, single-window facilitation through the Mahiti Portal (a search engine and business listing platform for startups, businesses and companies) and infrastructure support. In October 2024, the state approved a framework for Green Integrated Data Centre Parks, initially aimed at developing Mumbai and Navi Mumbai as green data centre hubs. The framework contemplated integrated parks, renewable energy-based operations, higher investment thresholds and incentives under the state IT and ITES policy.
The framework was subsequently amended through a recent government resolution in June 2026. The amendments increased the number of eligible integrated green data centre park projects from three to 20 and extended the framework beyond the Mumbai Metropolitan Region to the rest of the state. They also reduced the mandatory green power requirement for core data centre operations from 100 per cent to 51 per cent. The change is important because it retains the green character of the framework, while acknowledging the practical constraints around round-the-clock renewable supply, storage and open access implementation.
The 2026 amendments also appear to broaden the incentive package. They include an electricity tariff subsidy of INR 1 per unit for ten years for projects involving investment of INR 300,000m, and for 20 years for projects involving investment of INR 600,000m or more. They also remove the earlier requirements to:
- reserve two per cent of project land for incubation centres;
- allow cumulative investment by landowners, developers and other stakeholders to be considered for incentive eligibility; and
- provide an industrial incentive grant equivalent to 75 per cent of eligible fixed capital investment for integrated green data centre parks investing INR 600,000m or more.
Such projects may also be eligible for a four per cent interest subsidy on term loans for ten years, capped at INR 250m annually.
These measures are significant because power is usually one of the largest operating costs for a data centre. A green data centre project will require not only suitable land and construction approvals, but also a workable arrangement for renewable power procurement. This may be through open access, captive or group captive structures, or park-level arrangements. Cross-subsidy surcharge, additional surcharge, banking, wheeling, scheduling, change-in-law risk and continuity of state incentives will all need to be assessed at the planning stage.
The Maharashtra amendments also reflect a practical tension in policy design. States want to attract large data centre investments, but the green conditions attached to those incentives must be capable of being implemented. In practice, this may result in staged obligations, measurable renewable consumption and contract-based reporting, instead of an immediate requirement that every project operate entirely on renewable power from the first day of operations.
Several Indian states do not necessarily have a separate policy labelled as a ‘green data centre’ policy. However, their regular data centre policies often contain sustainability-linked incentives or enabling provisions. These typically operate through renewable energy procurement, electricity duty exemptions, concessional power treatment, open access support, green power reimbursements, dual-grid reliability, energy-efficient infrastructure requirements, water availability or cooling-related support.
Tamil Nadu’s 2021 data centre policy provided incentives for projects meeting at least 30 per cent of their energy requirement from renewable sources, including power tax subsidy for five years and concessional cross-subsidy treatment for wind and solar open access, subject to the policy period and applicable conditions. Karnataka provides a 100 per cent electricity duty exemption for five years and a green power tariff reimbursement for data centres using more than 50 per cent renewable energy, subject to applicable caps and policy conditions.
Meanwhile, Uttar Pradesh provides electricity duty exemption, dual-grid supply support and exemptions on transmission and wheeling charges, which can support reliable and, where renewable power is sourced, cleaner power procurement. Telangana’s clean energy framework, including its 2025 Clean and Green Energy Policy and open access regime, supports renewable energy procurement more generally, which may be relevant for data centre projects even if the incentive is not framed as a data-centre-specific green benefit. Andhra Pradesh’s data centre policy recognises the need to reduce the power and water footprint of data centres and is supported by the state’s integrated clean energy framework and recent reported measures enabling large strategic data centres to procure power, including renewable power, more flexibly.
Gujarat has also recently introduced a dedicated, green-linked data centre framework through the Viksit Gujarat Data Center Policy 2026-29. The policy requires eligible data centre projects to source at least 51 per cent of electricity consumed for core data centre operations from green and renewable energy. It also recognises the acute demand for water of data centres by providing support for captive desalination plants and assuring water availability, instead of relying only on conventional freshwater sources.
From a green data centre perspective, Gujarat’s approach is significant because it links data centre development with renewable power consumption, open access facilitation, dual power supply support and water sustainability measures. The policy therefore follows the broader trend of states moving from general data centre promotion towards sustainability-linked data centre incentives and operating conditions.
Environmental and operational issues
Green regulation is not limited to power. Data centres also raise issues around water use, cooling, diesel backup, e-waste, construction approvals and fire safety. There is no separate national water-use law for data centres, but individual projects may require municipal water permissions, groundwater approvals, sewage and effluent compliance, consents from pollution control boards, rainwater harvesting measures and, in some cases, coastal or environmental clearances.
Certification frameworks and green data centre rating systems are also becoming more relevant. They may not always be mandatory, but they can influence financing, customer contracts and investor diligence. Global cloud customers may require renewable energy certificates, emissions reporting, power usage effectiveness data, water usage data and audit rights. These requirements should be reflected clearly in colocation agreements, leases, development agreements and financing documents.
Project documentation should specify whether green certification or renewable energy use is a condition precedent, a continuing covenant, a target or a reporting obligation. It should also allocate responsibility for capital expenditure, increased power cost, changes in open access rules, failure to obtain incentives and loss of certification.
Conclusion
India’s green data centre framework is still evolving. At present, it is shaped by central laws on electricity, energy efficiency and digital infrastructure, along with state policies that determine land, incentives, approvals and local power arrangements. Recent state measures indicate a gradual move from general data centre promotion towards incentives linked to scale, renewable power use and integrated infrastructure.
At the same time, the relaxation of strict green power requirements shows that policy design is being adjusted to current constraints around renewable power availability, storage and open access implementation.
For developers and investors, diligence will have to focus on the conditions that affect implementation. Land use, title, zoning, renewable power procurement, open access charges, incentive eligibility, environmental approvals and continuing compliance should be examined at the structuring stage itself. Legal documentation should then reflect the commercial bargain clearly, including the availability of policy benefits, the cost of meeting green obligations and the consequences if those benefits are delayed, reduced or withdrawn.
A national policy may bring greater consistency in due course. Until then, green data centre projects in India will continue to require state-specific diligence, particularly on land, power procurement, incentive eligibility, environmental approvals and ongoing sustainability commitments.
Disclaimer: The views expressed in this article are personal to the authors and do not necessarily reflect the views of their respective organisations, firms, clients or professional affiliations. This article is intended for general informational purposes only and should not be construed as legal advice.