Water-guzzling data centres could strain fragile ecosystems along coasts

India’s digital economy is experiencing an extraordinary increase in data centre investments, establishing the country as a key location for global tech giants. A notable example is Google’s announcement to invest $15 billion over five years in an artificial intelligence (AI) data hub in Visakhapatnam, Andhra Pradesh. India’s data centre sector now has an IT load (total electricity consumed by computing equipment) exceeding 1.7 Gw, with an additional 2.5–3 Gw under development. STT Global Data Centres India manages 30 projects totalling 400 Mw, while Yotta Data Services operates three hyperscale sites with 434 Mw capacity. NTT Communications and CtrlS Datacentres oversee 268 Mw and 250 Mw, respectively. Indian-owned companies such as Sify Technologies, Nxtra Data, and AdaniConnex contribute between 33 Mw and 200 Mw.

 

However, despite these investments, significant structural imbalances persist. India produces nearly 20 per cent of the world’s data but accounts for only 3 per cent of global data centre capacity, creating a notable supply-demand gap. This has ignited intense competition among states, each offering fiscal incentives, land grants, and regulatory fast-tracks to attract large-scale facilities. The economic benefits are evident: Job creation, infrastructure upgrades, and technology spillovers transforming local economies.

 

The Data Centre Policy, 2020, established the framework for regulatory reforms and facilitating business operations, while the Hyperscale Data Centre Scheme launched in September 2021, with an allocation of ₹12,000 crore (approximately $160 million), aims to attract up to ₹3 trillion ($4 billion) in private investments over five years. Furthermore, the Union Budget 2022 granted infrastructure status to data and energy storage systems, enabling operators to access longer-term, lower-cost financing, positioning data centres alongside other critical infrastructure sectors.

 

The draft National Data Centre Policy 2025 — currently under consultation — proposes performance-linked incentives, including conditional tax holidays of up to 20 years for firms that meet targets in capacity expansion, energy efficiency, and job creation. Additional measures include extending input tax credits on capital assets and introducing a single-window clearance system to streamline approvals. Collectively, these initiatives aim to create a robust, investor-friendly ecosystem for the industry’s next growth phase. 

However, the environmental implications of this expansion are considerable and have not received the critical attention they deserve. Geographically, the industry is concentrated along the western and southern coasts: Mumbai accounts for 41 per cent of live capacity and Chennai 23 per cent. Google’s Visakhapatnam project is expected to increase east coast capacity, strengthening India’s position as a regional Cloud and AI infrastructure hub. But India’s coastal areas are among its most ecologically vulnerable. Potential coastal risks of water over-use include salinisation of freshwater and heightened vulnerability to flooding. India’s coastal zone has a high ground water table with a thin upper lens of potable fresh water. Therefore, over-extraction of groundwater for these new IT initiatives risks saline intrusion into the aquifers, which can permanently contaminate groundwater. These impacts may be compounded by land subsidence in areas where water tables are declining. Such aquifers are extremely vulnerable and must get special attention through a combination of measures of prevention, mitigation and protection against sea-water ingress.

 

Water requirements of these plants are huge as cooling systems can consume millions of litres annually, often in water-scarce regions such as Mumbai and Chennai. While some operators are adopting air-cooled or closed-loop systems, these options remain limited, and many facilities still depend on water-intensive evaporative cooling.

 

Data centres also consume large amounts of energy, and global estimates indicate they could represent up to 8 per cent of electricity use by 2030. In India, the sector’s increasing power demands place additional pressure on a grid still heavily dependent on fossil fuels, raising concerns about carbon emissions.

 

News reports (http://bit.ly/4qBjjAg) from across the world (Brazil, Britain, Chile, Ireland, Malaysia, Mexico, the Netherlands, Singapore, South Africa and Spain) indicate that as tech companies build data centres worldwide to advance AI, vulnerable communities have been hit by blackouts and water shortages. To prevent perpetuating unsustainable patterns, India must integrate environmental sustainability at every phase of data centre expansion. This involves sourcing renewable electricity, adopting energy-efficient infrastructure, and deploying advanced cooling and water-recycling mechanisms. Comprehensive water audits must become a recurring feature of these investments, as for all Indian industry. All companies must include details of their water footprint in their annual report, as also the steps they are undertaking to reduce water demand, thereby leading to increased value added per unit of water consumed. Simultaneously, benchmarks must be developed for specific water use in different processes. Each product should carry on its label its water footprint. Water footprints can be dramatically reduced through technologies and investments, which have a very short payback period. International examples, such as Microsoft’s Helsinki data centre, demonstrate the potential: Waste heat is redirected to supply nearby homes, renewable energy is prioritised, and innovative air-cooling markedly reduces water usage. 

By embedding sustainability into design and operations, India can ensure that its data-driven growth supports economic and technological goals while also conserving natural resources and reducing carbon emissions. Focusing on green infrastructure, efficient water management, and renewable energy adoption could position India as a global leader in environmentally responsible digital development.

 

The authors are, respectively, distinguished professor, Shiv Nadar University, and visiting professor, Centre for Development Studies, Trivandrum, and Ahmedabad University