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Karnataka wants to dramatically expand its data centre footprint. But this time, the state says the growth must come with a tighter check on how much power and water these facilities consume.
Its new Sustainable Data Centre Policy 2026–2031 targets 1 GW of cumulative data centre IT load by 2031 and a 10–12% share of India’s AI-ready data centre ecosystem. At the same time, it proposes incentives linked to energy and water efficiency, resource mapping to identify areas with adequate power and water, and greater use of renewable energy and treated water.
The shift comes as Karnataka already has 32 data centres, even as questions remain over how much water the existing facilities consume. TNM had earlier reported that neither the Bangalore Water Supply and Sewerage Board (BWSSB) nor the Karnataka State Pollution Control Board (KSPCB) separately tracked water use by data centres. The IT department estimated that the state's 32 data centres consume around 4,000 kilolitres of water a day, based on informal inputs from operators.
Now, the new policy proposes to map water and energy availability across existing and proposed data centre locations before planning further expansion.
Renewable energy, energy efficiency and water conservation
The policy encourages data centres to increase their use of renewable energy through state power procurement and open-access mechanisms.
It also introduces incentives linked directly to how efficiently data centres use electricity and water.
Data centres will have to report Power Usage Effectiveness (PUE) and Water Usage Effectiveness (WUE) on a plant-wise basis. PUE measures the total energy consumed by a facility against the energy used by its IT equipment, while WUE measures water consumption in relation to IT energy consumption.
PUE is calculated by dividing a data centre’s total energy consumption by the energy used by its IT equipment. A PUE of 1.0 is ideal, as it means all the power is being used by the computing equipment, with no additional consumption for cooling and other supporting systems.
WUE measures how much water a data centre uses for every unit of energy consumed by its IT equipment. It is calculated by dividing annual water consumption in litres by IT equipment energy consumption in kWh. A lower WUE indicates lower water use.
Up to Rs 20 crore for energy-efficient data centres
The government will provide PUE-linked financial incentives to encourage energy-efficient data centre design and operations.
The incentive will be available to eligible new data centre entities as well as expansion projects, both in Bengaluru and beyond. Units achieving a PUE of 1.00 to 1.20 can receive Rs 20 crore as one-time financial support.
The payment will not be made immediately after the facility achieves the prescribed PUE. The unit must demonstrate the required PUE performance consistently every year for three consecutive years; the incentive can then be disbursed in the fourth year.
The government says the measure is intended to reduce electricity consumption and support the growth of more energy-efficient digital infrastructure.
The policy also proposes sustainable data centre zones incorporating renewable energy, efficient cooling, water conservation and carbon-reduction measures.
To support long-term planning, the government will map water and energy availability and consumption across existing and proposed data centre locations. The exercise is expected to create a resource heat map that can identify local power and water capacity, flag potential constraints, inform site selection and guide infrastructure augmentation and mitigation measures.
TNM had earlier reported that neither the Bangalore Water Supply and Sewerage Board (BWSSB) nor the Karnataka State Pollution Control Board (KSPCB) separately tracked water use by data centres. The IT department estimated that Karnataka’s 32 data centres consume around 4,000 kilolitres a day, based on informal inputs from operators.
Three data centre parks planned
The government has also proposed data centre parks at Hoskote, Mangaluru and Mysuru, with a combined planned capacity of around 1,000 MW.
The parks are expected to provide common infrastructure including dual-grid power connectivity, access to substations, assured water supply and high-capacity fibre networks. The state proposes to make land available on a 30+30-year lease and provide support for electricity, water, statutory approvals and other infrastructure requirements.
Mangaluru has been identified as a strategic data centre location because of land availability, port-linked infrastructure, the potential for Cable Landing Station infrastructure and its growing technology ecosystem.
The policy follows an earlier government plan for 1,000 MW of data centre parks across Bengaluru, Mysuru and Mangaluru. That plan included a proposed 500 MW park near Hoskote, with solar power from Pavagada and access to 60 million litres per day (MLD) of secondary treated water, subject to further treatment before industrial use. The government had also identified around 350 acres in Baikampady Industrial Area in Mangaluru for a data park.
Incentives for treated water use
The policy also links financial support to water conservation.
Eligible data centre units in Bengaluru and other parts of Karnataka can receive reimbursement of 100% of the charges incurred for procuring and using treated water, capped at Rs 8 lakh per year. The benefit will be available for five years from the commencement of commercial operations.
A separate WUE-linked incentive provides reimbursement of 100% of water charges, up to Rs 30 lakh per year for two consecutive years, for eligible units that achieve a WUE between 0.7 and 1.3 litres per kWh and maintain the specified performance level for at least three consecutive years.
The policy's focus on treated water is intended to reduce the dependence of data centres on freshwater resources.
Who is eligible?
Entities seeking incentives and concessions under the policy will have to register with Karnataka Innovation and Technology Services (KITS) under the Department of Electronics, IT and Biotechnology. The registration process will be detailed in separate operational guidelines.
The policy covers data centre developers, Data Centre Park developers, operators and cloud service providers. It also covers entities that own and operate submarine cables and Cable Landing Stations for telecommunications or data centre purposes.
Academia, IT/ITeS companies, Global Capability Centres, startups and manufacturing industries can qualify for certain demand-centre incentives. Eligible entities must have their registered office in Karnataka.
Karnataka Udyoga Mitra will function as the single-window agency for clearances, while KITS will serve as the registration and policy implementation interface.
Special package for projects above Rs 3,000 crore
Projects involving investments of more than Rs 3,000 crore and considered strategically important can be considered for a customised incentive package.
The policy specifically identifies Cable Landing Stations, subsea or underwater data centres and desalination plants linked to data centres among projects that could receive such packages.
These projects will be assessed individually based on technical feasibility, regulatory compliance and environmental considerations.
Incentives beyond Bengaluru
The policy provides fiscal and infrastructure incentives for data centre investments both in Bengaluru and elsewhere in Karnataka.
These include capital subsidies, reimbursement of building approval fees, land-related concessions, power tariff benefits, connectivity support, electricity duty exemptions, renewable energy incentives and reimbursement of wheeling charges.
The government also proposes support for MSME manufacturers supplying the data centre industry and skilling programmes for workers in the sector.
Centre of Excellence for sustainable data centres
Karnataka will establish a dedicated Centre of Excellence for Data Centres for research, innovation, training and capability development.
Its focus areas will include AI-enabled data centres, energy-efficient infrastructure, advanced cooling and water management, and next-generation data centre design.
The government also proposes support for research into carbon-emission mitigation, heat-island mitigation, energy efficiency, advanced cooling, water optimisation and AI- and quantum-ready infrastructure.
Eligible R&D projects can receive one-time support of up to 50% of expenditure, capped at Rs 15 crore per project.
Why water and power are central to the policy
The push comes as data centre capacity expands rapidly across India. The Union government said in August that India's data centre capacity had grown from 375 MW in 2020 to around 1,575 MW, driven in part by demand from AI and high-performance computing.
The expansion has also raised questions over the availability of electricity and water needed to support large facilities.
IT/BT Minister Priyank Kharge said the state's approach needed to evolve as AI changes the infrastructure requirements of data centres.
“Karnataka was among the early states to recognise the importance of data centres and create a policy framework to support their growth. But the technology landscape has changed significantly, particularly with the rapid growth of AI, and we have also become more conscious of the environmental footprint of this infrastructure,” Kharge said.
The new policy, he said, is intended to allow Karnataka to continue attracting data infrastructure while making sustainability, energy efficiency and responsible water use central to its development.
