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NITI Aayog’s Data Centre Evaluation Framework to Help States Plan for Sustainable Growth, published on 14 October 2026, asks Indian States to establish that a proposed data centre can secure power, water and supporting infrastructure before approval. The guidance follows a project from site selection through commissioning and operations, with milestones, conditions and named responsible parties. It is common decision-making guidance—not a uniform new regulatory layer—and it does not by itself create a new environmental-clearance requirement.
What the framework changes for State approvals
Developed by the NITI Frontier Tech Hub with experts and stakeholders, the framework gives States a shared way to assess data-centre proposals. Its purpose is to balance investment promotion with infrastructure readiness, economic value and long-term sustainability. States are encouraged to identify gaps, assign each gap to a responsible entity and set completion dates rather than approve a campus on the basis of an initial land or power promise.
The framework explicitly says it should support decisions and “not prescribe a uniform approach or create an additional layer of regulation.” Individual States therefore retain authority over their approval processes and can set conditions suited to local infrastructure, climate and water constraints.
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| Pillar | What States evaluate |
|---|---|
| Power and energy | Firm supply, grid capacity, staged energisation, renewable power, storage and backup arrangements |
| Water and cooling | Fit-for-use demand, seasonal availability, competing users and reliable non-potable supply |
| Siting and environmental sustainability | Climate, ecological, land-use, pollution, waste and community risks |
| Economic and strategic value | Net contribution after public infrastructure and fiscal support, plus the project’s strategic role |
| Policy, governance and implementation | Approval conditions, monitoring, documentation, milestones and allocation of responsibility |
Power readiness must be demonstrated in stages
A developer, the distribution company (DISCOM) and the State Transmission Utility should jointly validate a Power Readiness and Ramp-up Plan. The plan is intended to match the campus’s actual build-out with power that can be delivered, rather than treating a long-term connection request as immediate capacity.
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Required elements of the plan
- Total campus demand, built capacity and expected utilisation.
- Sanctioned megawatts and year-by-year energisation targets.
- Substations, transmission connections and any grid augmentation.
- Firm captive, open-access and backup supply arrangements.
- Delivery milestones, funding responsibilities and cost allocation.
Renewable-energy and storage arrangements should be contracted or approved and capable of delivery by the relevant capacity milestone. This lets a State test whether a claimed low-carbon or resilient supply will exist when each phase of the facility goes live.
Water approval now includes a long-term catchment test
States should compare a project’s long-term surface-water, groundwater, municipal and treated-water supply with allocation priorities and existing users. Agriculture and other established users must be considered rather than treating a data centre’s demand as an isolated utility transaction.
How demand is calculated
Applicants should model fit-for-use demand for the proposed cooling systems, including peak-summer conditions and local temperatures. The framework cites approximately 40°C where that reflects applicable local conditions. A recycled, treated or otherwise non-potable source may be deducted from freshwater demand only when it is contracted, physically connected and available by the commissioning milestone; a future intention is not enough.
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Siting, climate and community safeguards
Before construction, States should assess forward-looking exposure to flooding, cyclones, earthquakes, extreme heat, coastal hazards and ecological sensitivity. The review also covers effects on water, traffic, roads, drainage, emissions, noise, waste, emergency access, land use and local employment. Large campuses may receive proportionate community-benefit requirements.
Lifecycle obligations extend beyond construction. States should require plans for electronic waste, batteries, hazardous materials, diesel systems, IT-asset disposition, recycling and eventual decommissioning. These requirements make the operator account for equipment and pollution risks after a facility stops running.
Documents States should request
The framework recommends a minimum approval record containing:
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- A site-readiness record showing 10–15 years of expansion headroom for land use, grid, water, fibre, rights-of-way and related clearances.
- A climate-risk assessment.
- A community-impact assessment where circumstances warrant one.
- Every readiness gap, its responsible entity and a completion date.
- A lifecycle and decommissioning plan.
- Designed power-usage effectiveness (PUE), water-usage effectiveness (WUE) and carbon-usage effectiveness (CUE) documentation.
Economic tests and clearer accountability
States are asked to compare net economic contribution with the public costs and support attached to a project, including land, infrastructure, electricity-duty, stamp-duty, utility and capital assistance. The analysis should distinguish operating models such as colocation, built-to-suit, powered-shell, cloud, Compute as a Service, GPU as a Service and managed hosting. Incentives can then be tied to measurable outcomes instead of headline investment commitments alone.
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Approval conditions should identify who must perform and verify each obligation. Depending on the issue, that party may be the facility or IT owner, workload controller, customer counterparty, data fiduciary or processor, regulated entity, compute controller or incentive recipient. This allocation is intended to prevent responsibility from disappearing across a complex supply and operating chain.
Is this a new environmental clearance?
No. A 2026 Press Information Bureau answer states that “AI Data Centres do not, per se, require Environmental Clearance (EC) under the Environmental Impact Assessment (EIA) Notification, 2006, as amended.” That statement concerns the EC regime; it does not remove other approvals or local conditions.
Where a building project is otherwise subject to environmental appraisal, State environmental authorities still consider freshwater availability, water-balance reports, greywater generation, and greywater recycling and reuse. The NITI Aayog framework therefore adds a structured readiness test for State decision-making without converting every AI or data-centre proposal into a new EC category.
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For a practical comparison, examine the same evidence in each case:
Quick Recap
- Firm power available at each ramp-up milestone and the time required to energise it.
- Net freshwater demand, cooling assumptions and WUE.
- Contracted recycled-water share and safeguards for drought or competing users.
- Grid, fibre and land expansion headroom.
- Climate, ecological and community risk.
- Economic value after incentives and public infrastructure costs.
- Clarity of responsibility, monitoring and enforcement.
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