NITI Aayog Releases Data Centre Evaluation Framework, Highlights Power and Water Planning Risks

October 20, 2026

NITI Aayog's Frontier Tech Hub released the Data Centre Evaluation Framework to Help States Plan for Sustainable Growth on October 14, 2026, outlining a structured approach for states to assess data centre investment proposals. The framework emphasizes grid readiness, long-term water availability, site suitability, environmental sustainability and measurable economic benefits.

Designed as an advisory decision-support tool rather than a new regulatory requirement, the framework aims to help states identify infrastructure constraints before approving or supporting projects. It also provides developers and investors with clearer guidance on the technical, environmental and infrastructure considerations that could influence future data centre development in India.

What is NITI Aayog's Data Centre Evaluation Framework?

The data centre evaluation framework India's policy think-tank has published is a decision-support tool for states. Its stated purpose is to help them assess new proposals on a consistent basis, find infrastructure gaps early and link public support to measurable results. NITI Aayog distinguished fellow Debjani Ghosh said, "What we have done is create a common set of criteria which can be used by states to evaluate proposals."

Coverage describes five evaluation pillars: power and energy; water and cooling; siting and environmental sustainability; economic and strategic value; and policy, governance and implementation. One report states that Deloitte India was also involved in the release. Other reports did not confirm this.

Why does the Framework Emphasize Power and Water Availability?

Data centres are among the most power-intensive and water-dependent industrial loads a state can approve, and AI-focused facilities raise both demands. In the release coverage, Ghosh cited an ITU projection that global data centre power requirements could reach 90 GW over the next three to four years. Local grid capacity can be a constraint even where state-wide generation is adequate, particularly when several large facilities cluster in one area.

Separate estimates cited in India's Economic Survey 2025-26 have put water consumption for a single AI data centre at up to 20 lakh litres per day, although actual consumption varies with facility size, cooling technology and operating conditions. The NITI Aayog framework therefore focuses on site-specific water availability, peak demand and cooling requirements rather than applying a single national consumption figure.

What does the Framework Recommend on Power Planning?

NITI Aayog's Data Centre Evaluation Framework recommends that states assess grid readiness, electricity demand and supporting power infrastructure before evaluating major data centre proposals. Key recommendations include:

• Joint power readiness and ramp-up plan: Developers, distribution companies and state transmission utilities should coordinate on a plan covering projected electricity demand, sanctioned capacity, commissioning milestones, necessary grid upgrades, funding responsibilities and implementation timelines.
• Infrastructure-linked load approvals: Additional electricity load should be linked to the commissioning of required power infrastructure and achievement of agreed readiness milestones.
• Grid infrastructure funding: The framework recommends assessing grid upgrade costs and allocating funding responsibilities appropriately. Grid assets developed exclusively for a particular data centre project may be applicant-funded, depending on the applicable arrangements.
• Demand-response readiness: For facilities above 20 MW, the framework recommends automated demand-response capability and integration with State Load Dispatch Centres, subject to applicable grid codes.
• Renewable and captive power integration: Power readiness assessments should also consider proposed renewable or captive electricity arrangements, their availability and their role in meeting the facility's operational requirements.

These recommendations aim to help states identify potential grid constraints, coordinate infrastructure development and assess whether electricity supply can support a data centre's planned capacity and commissioning schedule.

What does It Recommend on Water Planning and Site Selection?

On water, states are advised to prepare a seasonal water balance over 20 to 30 years, covering surface water, groundwater, treated wastewater, climate and competing demand such as drinking water and irrigation. Allocations should not reduce dependable supplies for existing users. In high-stress locations, the framework suggests independently validating water sources and considering treated or desalinated water where feasible. Recycled water counts toward supply only when it is contracted, connected and available at the relevant commissioning stage. This is effectively a water stress assessment built into the approval process.

On site selection, coverage says states should identify data-centre-ready zones after assessing grid access, water, land, fibre connectivity and clearances, with verified data and expansion headroom of 10 to 15 years. They should also identify high-risk areas where development should be restricted because of water stress, hazard exposure, land-use conflicts or inadequate infrastructure. For large campuses, a proportionate community impact assessment covering water, traffic, emissions, noise, waste and employment is recommended.

Are the Framework's Recommendations Mandatory?

Largely no. Business Upturn, ANI and Outlook all describe the framework as advisory, meant to support decisions and not to impose a uniform approach or add a regulatory layer. States decide whether and how to apply it. One report, GKToday, describes the 20 MW demand-response item as the framework's only mandatory element, while Outlook lists it among the recommendations. Because the official document was not available for review, that point should be confirmed against the text. Any binding requirement would come from state approval conditions, grid codes or existing law, not from the framework itself.

How could the Framework Affect Data Centre Investment in India?

The framework asks states to compare projects on a like-for-like basis and tie incentives to measurable outcomes, including commissioning milestones, renewable supply, efficient power and water use, local hiring, skills and domestic procurement. It also proposes a time-bound digital single-window system for approvals and a state approval matrix and suggests a central audit mechanism with MeitY as the nodal ministry.

For developers, this points to more evidence being expected at the approval stage on data centre regulatory approvals, power and water. Reports differ on India's capacity baseline, citing about 1.4 GW in Q2 2025 and about 1.57 GW in August 2026, and on the 2030 outlook, so this article does not rely on one projection. The coverage also notes that experts have called for independent assessment of proposed large AI data centre projects in Visakhapatnam. Outlook describes these as calls for scrutiny and not proof of shortages.

The framework does not bind a developer, but it shows what states are likely to ask. Projects that can show power and water readiness early will be better positioned to address evaluation criteria.

IMARC Engineering’s Perspective

For developers evaluating new data centre sites, the framework reinforces the importance of conducting power infrastructure assessments, water availability studies, site feasibility evaluations and technical due diligence before major capital commitments. These assessments can support infrastructure DPR preparation, project phasing, utility coordination and investment risk evaluation, particularly where grid upgrades or water infrastructure must be developed alongside the proposed facility.

The infrastructure DPR then needs to carry these findings into cost estimates, phasing and the approvals matrix, so that capacity is sanctioned in step with infrastructure. A project risk assessment should cover grid delay, water allocation, community concerns and incentive conditions. We support developers, investors and state agencies with feasibility studies, technical due diligence, DPR preparation, regulatory approval planning and EPCM consulting for data centre project development.

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