Andhra Pradesh to issue power distribution licences to large data centres

New Delhi In a first-of-its-kind policy initiative, the Andhra Pradesh government will issue power distribution licences (discom) to large data centres to ensure reliable and uninterrupted electricity supply-similar to the incentive given to US technology company Google for its data centre cluster in Visakhapatnam.

The move is aimed at addressing the sector's growing power needs and attracting investments into digital infrastructure. Other large companies, including Reliance and RMZ, are also expected to seek similar approvals from the state government.


Read more: India’s data centre market to reach $22 billion by 2030

Under the policy, data centre developers meeting a minimum threshold of 300 MW connected load will be permitted to build, own, and operate their own internal electricity distribution systems within designated project areas. The framework enables these facilities to procure power directly from various sources, including renewable energy generators, captive plants, and power exchanges, rather than relying solely on conventional distribution utilities.

Read more: Google secures discom licence for Vizag data centre hub

The government's rationale is rooted in the unique energy demands of data centres, which require constant, high-quality power at scale. Traditional high-tension consumer arrangements are often insufficient for such large, continuous loads, according to officials.

The new policy seeks to provide a more flexible mechanism while maintaining regulatory oversight through existing electricity laws and state regulatory bodies.

"This will allow the company to procure power directly from generators," a senior official, who didn't wish to be named, told ET. "This will help companies in cutting costs and get reliable power."

A key provision of the policy is the requirement that at least 51% of a data centre's energy consumption must be sourced from renewable energy. This aligns with broader national and state-level efforts to boost clean energy adoption, particularly as energy-intensive sectors expand.

The framework also outlines safeguards for existing distribution companies (Discoms), including restrictions on migration of current consumers into the deemed distribution license (DDL) system and provisions for standby power arrangements where required. These measures are intended to prevent revenue loss or stranded assets within the existing power distribution ecosystem.

Andhra Pradesh has been positioning itself as a potential hub for data centres, citing factors such as land availability, renewable energy resources, and connectivity infrastructure, including ports and submarine cable access. The new policy adds a regulatory dimension to these efforts by attempting to address one of the sector's primary constraints-reliable and scalable power supply.