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Google announced a massive data centre in Andhra Pradesh’s Vizag on Tuesday, October 14, with a lot of fanfare. Praises were exchanged between Google CEO Sundar Pichai and Prime Minister Narendra Modi over the ‘landmark development’. The data center being built at a cost of Rs 87,520 crore (USD 10 billion) will have a 1-gigawatt capacity.
An MoU was signed between Google Cloud and the Andhra Pradesh government in Delhi. Union Finance Minister Nirmala Sitharaman called it a “momentous occasion.” Andhra Pradesh Chief Minister Nara Chandrababu Naidu congratulated his son, IT Minister Nara Lokesh, and thanked PM Modi for their role in bringing the data centre to Vizag.
Amid criticism over the water usage and environmental footprint of AI data centres, another question was posed by the IT Minister of the neighbouring state Karnataka, Priyank Kharge. He asked whether Andhra Pradesh, or any other state for that matter, can afford the kind of subsidies being offered for the data centre–discounts on land, water, electricity, tax waivers, etc.
So what are the incentives Andhra Pradesh is really offering to the data center? Are they vastly higher than other states? And how much would it cost?
What incentives is Google getting from AP?
Earlier in 2022, under the previous YSRCP government, the state government had allotted 130 acres of land to Adani Group for a 200MW data centre, along with an IT business park and a skill university.
Now, the TDP government is set to allot another 480 acres in Visakhapatnam for the Google data centre, which is being built in partnership with the Adani Group and Airtel. It will have a capacity of 1 gigawatt.
Another 550 MW data centre by Sify Technologies was also recently approved in Vizag.
As of April 2025, India’s data centre capacity was estimated at around 1.26 GW, and is projected to double to over 2 GW by the financial year 2026-2027. Navi Mumbai, Chennai, Noida, Hyderabad, and Bengaluru are some of the existing data center hubs in India.
AI data centers are specifically meant to support complex AI workloads. They need huge amounts of water for keeping their servers cool, apart from electricity. A short conversation with ChatGPT is estimated to consume about half a litre of water.
An official from the Andhra Pradesh government listed the incentives being offered towards the Google AI data center, but claimed that these are not so different from industrial subsidies usually offered by other states such as Karnataka.
The AP government is giving a 25% discount on the market price of the 480 acres of land to Google. Apart from this, there is a waiver on stamp duties, a 25% discount of the price of industrial water supply, exemption on electricity duty and a one-rupee discount on industrial tariff for electricity. The concession that is being questioned the most is the 100% reimbursement of State GST during the construction phase.
Currently, the industrial tariff for electricity is around Rs 5 to 7 per unit, which means the discount is about 15-20%.
The subsidies will continue for about 15 years for electricity and 10 years for water.
However, the Andhra Pradesh official claimed that Google will build its own renewable energy project, with no incentives from either the state or Union government.
The SGST waiver is capped at Rs 2,245 crores, which is about 2.5% of the Rs 87,520 crore investment on the data centre.
According to the AP official, these are standard benefits provided by most states.
When we asked a Karnataka official if these concessions were out of the ordinary, he pointed out that the question was not just about concessions but whether a state can afford it. According to the Comptroller and Auditor General (CAG)’s recent report on state finances, Andhra Pradesh had the highest revenue deficit in the country in 2022-23, followed by Tamil Nadu and Rajasthan. Karnataka on the other hand saw a revenue surplus of Rs 13,496 crore, the fifth highest.
“A state has to keep in mind its revenue when it makes such decisions,” the official said.
Priyank Kharge too pointed to AP’s liabilities, saying they have gone up to nearly Rs 10 lakh crore. “In just one year, they have borrowed over Rs 1.61 lakh crore, and the revenue deficit to GSDP has worsened, rising from 2.65% to 3.61%,” Priyank said.
States and concessions
The TDP government has been aggressively pushing to develop Vizag into a major technology hub. The Andhra Pradesh official noted that the incentives offered to the Google AI data centre weren’t as extreme as the land allotted to TCS and Cognizant – 21 acres each for a token price of 99 paise.
While he claimed that the subsidies given to Google were not so different from those offered by Karnataka and other states, officials from the neighbouring state disagreed.
A Karnataka government official said that the state’s data centre policy doesn’t provide any waiver for land prices or SGST, and that the subsidies provided by Andhra Pradesh were much higher.
Karnataka’s data centre policy provides electricity duty exemption for five years, land subsidy of 10% outside Bengaluru Urban district up to 10 acres, exemption of land conversion fees for converting agricultural land to industrial land, stamp duty exemption, and green power tariff reimbursement capped at Rs 1.25 crore for five years.
Maharashtra’s IT policy also provides incentives for data centres such as stamp duty exemption, permanent electricity duty exemption, power tariff subsidy of one rupee per unit for five years, facilitation for establishing captive wind or solar power farms (wind/solar), etc.
Tamil Nadu’s policy provides 100% subsidy of electricity duty for power purchased from the state government or generated from captive sources, but only for five years. It also provides cross subsidies on wind and solar power available for open access consumers, stamp duty concessions, a conditional 50% land cost subsidy up to 10 acres, etc.
Uttar Pradesh offers 25% to 50% land subsidy up to Rs 75 crore, exemption on stamp duty, electricity duty (for 10 years), transmission charges, etc.
Another possible reason for Andhra Pradesh’s edge, as Priyank Kharge pointed out, is the TDP’s alliance with the BJP.
“They’re getting Rs 10,000 crore from Modiji for Amaravati. What are (Karnataka) BJP MPs doing? Priyank asked, stating that Bengaluru was among the top cities in the world for AI with skilled workers available.
In the 2024 Union Budget, Rs 15,000 crore were promised for the development of Amaravati. But the bulk of the support was in the form of loans from multilateral development agencies such as the World Bank, facilitated by the Union government.
However, according to AP government officials, no additional incentives were offered by the Union government specifically for the Vizag Google data centre. The New Data Centre Policy of the Union government, which is still under consultation, will apply to the Vizag data centre once approved by the Union Cabinet, along with all other data centres in the future, the official said. One of the reported features of this policy is tax exemption of up to 20 years, based on targets achieved.
The Andhra Pradesh government claims that another advantage in Vizag is the abundance of water. “There is more than 3000 tmc of water which goes into the sea every year from the Godavari river alone, and Vizag is located close to the tail end of the river. So from a water availability perspective is absolutely no issue. This is the main reason data centers are flocking to Vizag,” the official said.
This surplus water has been a contention of inter-state river water disputes for years.
Priyank’s criticism came amid ongoing friction between the two state governments – AP IT Minister had recently had a public spat with him after he suggested that tech firms and startups relocate from Bengaluru to his state. The dispute also happened in the backdrop of tech companies and businesspersons criticising the Karnataka government for poor roads and infrastructure in Bengaluru.
Priyank said, “What they will not tell you is about the huge incentives–they are giving Rs 22,000 crore in subsidies. Can any state actually afford that?”
Lokesh responded with a snide remark, suggesting that Priyank was merely envious about losing out the data centre to AP.
“They say Andhra food is spicy. Seems some of our investments are too. Some neighbours are already feeling the burn!” Lokesh said.