India’s data-centre investment race is moving beyond land and tax breaks to power tariffs, green-energy access, water security and grid connectivity, as states roll out long-duration subsidies to capture the next wave of AI, cloud and hyperscale projects.
The shift comes as installed data-centre capacity is projected to rise from about 2.5 GW to 8.5-9.5 GW by 2030, while demand could reach 7-8 GW. The sector may account for 7-8% of incremental peak electricity demand, putting reliable power and cooling infrastructure at the centre of investment decisions.
Uttar Pradesh’s draft Data Centre Policy 2026 seeks more than ₹2 lakh crore of investment and an additional 2 GW of capacity, while targeting at least 50% renewable-energy use in new facilities by 2030. Data-centre parks can receive reimbursement of 60% of annual interest for seven years, capped at ₹10 crore a year and ₹50 crore overall. The state will also reimburse the lower cost of one of two grid connections for the first eight parks or until 2 GW is added.
UP has proposed a 25% land subsidy in Madhyanchal and Paschimanchal and 50% in Bundelkhand and Purvanchal, along with 100% stamp-duty exemption on government land transactions. It also offers transmission and wheeling-charge concessions for 25 years. Individual units can receive a 7% capital subsidy capped at ₹20 crore and full electricity-duty exemption for 10 years.
“There isn’t one state that wins on everything. Maharashtra leads on connectivity because of Navi Mumbai’s cable landings. Telangana and Karnataka do well on operational readiness, with essential-service status, strong talent pools and Karnataka’s cooler climate helping reduce cooling costs,” said Neshwin Rodrigues, Senior Energy Analyst, Asia at Ember.
“Andhra Pradesh has made the most aggressive recent push, landing Google’s $15-billion Vizag investment. Gujarat has reset the scale with its 2026-29 policy, offering a 20-year power tariff subsidy and duty reimbursement, the longest of any state. Tamil Nadu remains strong on land and cable connectivity, while UP and Haryana are rising on NCR proximity and duty waivers, though they lack the track record of older hubs,” he added.
Gujarat and Maharashtra
Gujarat’s Data Centre Policy 2026-29 has raised the competitive bar with a target of ₹6 lakh crore of investment and 7.5 GW capacity. It offers a ₹1-per-unit power tariff subsidy and full electricity-duty reimbursement for 20 years, 100% exemption from stamp duty and registration charges, and a 4% interest subsidy on term loans for 10 years, capped at ₹25 crore annually. Projects in Dholera can receive a 2.5% capital subsidy.
Eligible projects must source at least 51% renewable power, while captive desalination projects can receive capital support.
Maharashtra has expanded its Integrated Green Data Centre Parks policy from three parks to 20 and extended it statewide. Projects investing ₹30,000 crore can receive a ₹1-per-unit electricity subsidy for 10 years, while those investing at least ₹60,000 crore can get the support for 20 years.
Larger projects can also receive an industrial promotion subsidy equivalent to 75% of eligible fixed capital investment and a 4% interest subsidy for up to 10 years, capped at ₹25 crore annually. The compulsory green-energy share has been lowered from 100% to 51%. Maharashtra has a ₹16.69-lakh-crore pipeline across 44 mega projects, representing 23,800 MW capacity.
Andhra Pradesh offers industrial power tariffs and case-specific support for dual-grid infrastructure and transmission and wheeling charges. Mega projects above 50 MW or ₹5,000 crore in plant and equipment can seek tailor-made support for water, roads and related infrastructure through public-private partnership arrangements. Tamil Nadu’s policy framework offered a full electricity-tax waiver for five years, open-access charges at 50% of conventional rates, dual-grid supply for projects of at least 50 MW and an additional feeder above 100 MW. State-promoted parks were also assured uninterrupted water at cost, with recycling encouraged.
Anujesh Dwivedi, Partner, Deloitte India, said electricity is the largest component of data-centre operating cost, making duty waivers, tariff support and open access “impactful”.
Rodrigues said cross-subsidy surcharge can outweigh electricity-duty benefits for operators procuring renewable power through open access. A generous duty waiver may fail to attract projects if green power remains expensive to wheel.
Water Security
Water is also becoming an approval issue. Gujarat requires captive desalination rather than dependence on local freshwater, while Rajasthan mandates zero-liquid discharge and groundwater recharge, Rodrigues said.
Shubhojeet Chakravarty, Partner, AI Infrastructure and Data Centers, PwC India said coastal states are supporting desalination, while others are promoting zero-liquid discharge and closed-loop liquid cooling. States are also easing green open access, though investors continue to evaluate digital infrastructure and long-term operating sustainability.
Dwivedi said India is among the few countries capable of providing gigawatt-scale, 100% clean-energy supply to new data centres within two-three years, compared with six-eight years in many developed markets.
“Electricity costs account for a substantial share of operating expenses. Duty waivers and concessional tariffs can materially improve data-centre economics,” said Anand Kulkarni, Director, Crisil Ratings. Such benefits are increasingly becoming baseline expectations, making their stability over the 15-20-year asset life critical, he added.