Execution tops sops as states race to attract data centres

As states compete to attract data centre investments amid rising cloud and artificial intelligence demand, industry executives say the real differentiator isn't incentives or policy announcements, but the ability to deliver power, approvals and infrastructure on the ground.

Karnataka, Telangana, Maharashtra, Gujarat, Uttar Pradesh, Odisha, Tamil Nadu, Haryana and West Bengal have announced policies and incentives to position themselves as preferred destinations. But operators say the competition has now shifted from policy to implementation. For them, power remains the most critical requirement—data centres require uninterrupted electricity, high-capacity substations and long-term regulatory certainty.

"Getting the right kind of power, substations, capacity in power, all that is important," said Alok Bajpai, managing director-India, global data centres, at Japanese tech firm NTT Data, which operates data centres in several Indian cities. “Power will always remain one of the major priorities for us where we need government and regulatory support,” he said.


Beyond overall generation capacity, companies need timely access to substations, high-voltage power lines and expandable capacity. A typical data centre requires between 40 MW and over 200 MW, placing enormous strain on local grids.

"Sustainable power is an area where collaboration between government and private sector will be increasingly important, as it will help us grow," Bajpai added, noting that partnerships can help meet land and solar power requirements.

Recent investments in Telangana and Karnataka underscore this momentum.

Proximity to customers

"When companies evaluate states, they look at proximity to their customers. For instance, Microsoft serves many big clients in Hyderabad, so being close to the customer offers an advantage," said Srihari Srinivasan, director and lead for data centre services at Savills India.

Without timely collaboration between government and private companies on power infrastructure and faster approvals, executives also warn that capacity growth could hit a bottleneck within a few years.

Sharad Agarwal, chief executive of Sify Technologies data centre business, said faster approvals and the ability to operationalise policies on the ground are critical for companies in the sector.

Sify, for instance, selects locations based on existing transmission and distribution infrastructure, Agarwal said.

Incentives through state policies such as green tariffs, open-access flexibility and electricity duty exemptions help improve project economics. But predictability of approvals and state’s ability to deliver high-density power infrastructure truly moves the needle, said Surajit Chatterjee, managing director and head of data centre at CapitaLand Investment.

Factors like submarine cable landing stations, proximity to enterprise customers and existing infrastructure also determine which cities emerge as data centre hubs. Mumbai and Chennai continue to dominate, partly due to their cable landing infrastructure and concentration of enterprise customers, said industry executives.

India currently has 1.5 GW of data centre capacity, which is projected to reach 14 GW by 2035, driven by demand from AI, cloud and 5G, according to a recent PwC India report.

In the first half of 2025, Mumbai led India's data centre market with 47% of new capacity additions, followed by Chennai at 30% and Bengaluru at 14%, according to market intelligence platform Savills India Research.

Demand shifting to small cities

While global players increasingly eye top cities, other players are targeting smaller cities. Datasamudra, the data centre division of Teleindia Datacenter, plans to set up a 35-40 MW AI-driven data centre in Mangaluru and 5 MW edge centres in Mysuru and Hubballi-Dharwad in Karnataka, as reported by ET a week ago.

The complexity around land, power and approvals has pushed most international data centre operators to enter India through joint ventures with local partners. Bajpai said this is the natural route for companies that need to navigate approvals and infrastructure quickly. Meta Platforms, for instance, is in talks with Sify Technologies to build a 500 MW hyperscale AI data centre in Visakhapatnam, as reported by ET in November.

However, execution capability varies widely. While India has sufficient power generation capacity, delivering it at the substation level with adequate density and reliability differs significantly across states.

Infrakey Datacenter Parks signed a deal with Telangana to build a 1 GW AI data centre with an investment of Rs 70,000 crore. Singapore-based AGIDC committed Rs 67,500 crore for an international gateway data centre in the state. Both deals were signed at the Telangana global summit on December 9.

Microsoft has promised to launch its Hyderabad data centre by June next year as part of the tech major’s $3 billion investment in AI-ready data centres across India. Meanwhile, NTT Data Group opened its new data centre campus in Bengaluru, promising to invest more than Rs 2,400 crore in the facility.