Big push for data centres in India as states evolve dedicated policies

India, which aims to become the 'global data centre' hub, needs to ramp up its DC footprint as data consumption has spiked due to Covid-19 and the mandate to adhere to localisation rules

In 2020, the government of Singapore came out with a moratorium on new data centre permissions, citing that the city-state wants to strike a balance between environmental sustainability and business needs. Data centres were using almost 7 per cent of Singapore's power generation. With the moratorium, it became the second place to put on hold its data centre expansion, after Amsterdam did it in 2019.

It is this vacuum for investors that Indian states are now trying to cash in on, with Tamil Nadu already coming out with a Data Centre Policy last month and Karnataka set to bring out its own version very soon. At the Centre, the government too set to come out with a data centre policy soon. Among the states, it was Telangana that took the lead way back in 2016.

“We are expecting an investment of around $10 billion over the next five years. We are speeding up clearances, ensuring land availability and the government is also giving some cloud business to the people who are setting up their centres in Telangana," said Jayesh Ranjan, Principal Secretary, Industries, commerce and information technology departments in Telangana. Of late, the state was getting serious attention from investors investments from players like Flipkart, Amazon and CtrlS. It is also reportedly in advanced talks with Microsoft for setting up a facility for Rs 15,000 crore.

Neighbouring Tamil Nadu came out with a policy last month. This is after bagging investments worth about Rs 18,000 crore in 2020-21. Compared with other cities, Chennai has an edge as it has the second-highest number of submarine cable landing stations in the country, at over 30 per cent of India’s subsea cables that are connected to 264 landing stations globally.

"Tamil Nadu has the inherent advantage in terms of the best infrastructure, cable points and all, which not many (other) states have. We anticipate a lot of investments in the near future," said Neeraj Mittal, secretary, information technology department, Tamil Nadu. The state is lining up sops like electricity tax exemption and power at existing industrial tariff.

India, which needs to ramp up its data centre footprint as data consumption has spiked due to the pandemic and the mandate to adhere to data localisation regulation, has set itself an ambitious aim to be a ‘global data centre’ hub.

Nasscom's taskforce

In February 2020, Finance Minister Nirmala Sitharaman in her budget speech announced the intention of the Government of India to develop a Data Centre policy. In response to this announcement, Nasscom formed a Data Centre Policy Taskforce consisting of senior industry leaders, to propose recommendations that can help promote the growth of data centres in India. The taskforce, after deliberations, arrived at specific recommendations which were submitted to the Ministry of Electronics and Information Technology (MeitY) in May 2020.

The suggestions, among others, included providing uninterrupted power, enabling consumption of renewable energy 24x7, creating a separate building code for data centres, measures aimed reducing cable breaks, etc. These suggestions were well received by the government and almost all of Nasscom’s recommendations found place in the draft Data Centre policy published by MeitY in November 2020 for stakeholder consultation. Nasscom participated in the consultation and shared its feedback on the draft. Currently, it is awaiting notification of the policy.  

“Nasscom has advocated the need for a state-level data centre policy in our engagement with various state governments. Telangana and Tamil Nadu have already adopted data centre policies, and states like Karnataka, Haryana, Uttar Pradesh, Maharashtra are currently considering a separate policy. Our suggestions focus on enabling power, land & connectivity infrastructure for data centres and accommodating their unique building requirements in the relevant regulations,” said Ashish Agarwal, Nasscom VP & head of policy.

DC industry in India

Of India's current data centre capacity of 499 mega watts (Mw), about 45 per cent is based out of the financial capital Mumbai, followed by Chennai, Pune and Bengaluru contributing 12 per cent each, Delhi around 8 per cent, Hyderabad around 7 per cent and Kolkata around one per cent, according to the H1 report by JLL.  

The Indian DC industry is expected to more than double to 1,007 Mw by 2023 from its existing capacity of 447 Mw, said a JLL report. Mumbai and Chennai are likely to drive 73 per cent of the sector’s total capacity addition during 2021-23, while other cities like Hyderabad and Delhi NCR will emerge as new hotspots.

The industry faced criticism in countries like Singapore for its intensive use of power and water. Most of the data centre infrastructure -- servers, storage equipment and cooling systems -- has a massive electricity intake. With the first half of 2021 itself seeing commitments worth $3 billion, India's power requirement is also expected to rise. According to JLL estimates, it is expected to double to 1 Gw by 2023. This may well be the reason why some states are planning to give additional sops to companies that are meeting at least 30 per cent of their power consumption via renewable energy sources.

In Karnataka's case, the state has already started taking industrial feedback on its upcoming policy, while Maharashtra too is set to come up with changes in its existing guidelines.  

Private sector involvement

Meanwhile private players such as NTT, Equinox and real-estate group Hiranandani’s Yotta Infrastructure are ramping up the number of data centres.

NTT, the world’s third largest DC Player, is also ramping up its presence in India. Last year the company said it will invest $2 billion in ramping up its presence in India. “Of this, $1.5-1.6 billion is being invested in acquiring land parcels and building DC parks, while the remaining $400 million will be used for under-sea cable connection to DCs in Chennai, Mumbai and Kolkata. We are also setting up renewable energy plants across the country. We have already set up 62.5 Mw plant in Maharashtra, 20 Mw Karnataka and are looking to augment that by another 100 Mw by setting up plant in Maharashtra,” said Sharad Sanghi, CEO NTT India in an earlier interview to Business Standard.

Yotta Infrastructure had announced that it will open two more data centres in Nodia in January 2022 at an investment of Rs 2,000 crore.

Earlier this year, US-based Equinix announced its entry into India with the acquisition of GPX Global Systems India operation. The two new International Business Exchange (IBX) data centres in Mumbai, dubbed Equinix MB1 and MB2, form a network-dense data center campus with more than 350 international brands and local companies, including the world's leading cloud service providers (CSPs), global networks, content delivery network (CDN) providers, all local carriers, 170 internet service providers (ISPs) and five internet exchanges.

Table: Logging in 

City	IT Load Capacity (Mw)	City	IT Load Capacity (Mw)
Mumbai	225	Chennai	62

Bengaluru 61 Pune 61

Delhi

42 Hyderabad 33 Kolkata 6 Other cities 9

Source: JLL