The Cost Beneath the Cloud

A boomtown data center economy is rising across five Indian states with no cap on the water it draws or the coal it burns to stay cool.

In Tusiana, a village of about two thousand people in Uttar Pradesh’s Gautam Buddha Nagar district, the road suddenly changes. For a while, it is wide and newly paved, surrounded by high walls, barbed wire, and police barricades, with a substation humming behind the fence. This marks the edge of the Yotta Data Center Park, which Chief Minister Yogi Adityanath and Rajeev Chandrasekhar, then India's junior minister for electronics and IT, opened in 2022. Just a kilometer further, the pavement falls apart, open drains line the street, and wells that once reached water at twenty or thirty feet now have to go down to eighty.

Uttar Pradesh signed the deal with Yotta for roughly 39,000 crore rupees, about 4.4 billion dollars, to build five more data centers on the same model over the next several years. The state’s data center policy promises round-the-clock water to the companies that build there, but it sets no limit on how much groundwater they can draw and no requirement that they report it. Yotta has told reporters it has dug no borewells for construction or operations. District officials, asked how much water the park and its neighbours actually pull from the ground, have said they do not know. The state’s agreement guarantees Yotta a fast-tracked build-out. It guarantees Tusiana nothing but the cost of digging deeper.

High Water Stress

Tusiana is not an outlier. It is the leading edge of a pattern. Three-quarters of India’s roughly 280 data centers sit in just five states, Maharashtra, Tamil Nadu, Karnataka, Telangana and Uttar Pradesh, according to mapping by the World Resources Institute’s India office, and more than half of all facilities nationwide are built in regions already classified as water stressed, among them Chennai, which nearly ran its reservoirs dry in 2019 and is now one of the country’s established data center hubs. S&P Global estimates that sixty to eighty percent of Indian data centers will face high water stress before this decade is out. That is a hard number to square with India's underlying math: the country holds close to a fifth of the world’s population and, per the World Bank, only about four percent of its renewable water.

The situation with electricity is just as difficult. In May, India’s power grid broke its own peak demand record for four days in a row, reaching nearly 271 gigawatts as an early heat wave pushed temperatures above 47 degrees Celsius in parts of Uttar Pradesh. The power ministry asked people to save electricity. Chennai, one of the main data center states, had nightly power cuts during this time. To meet demand, coal provided about 62 percent of the power at the peak, while solar gave 22 percent and wind and hydro each supplied 5 percent. Over the whole year, coal's share is even higher, close to three-quarters.

The same tensions are already visible elsewhere. In Memphis, Elon Musk’s xAI, now part of SpaceX, has run dozens of gas turbines for more than a year to power its Colossus data center without the Clean Air Act permits the law requires. The turbines sit in neighbourhoods that are majority Black. The NAACP sued in April.

Last month, the Trump administration’s Justice Department intervened on xAI’s side, arguing that enforcement would endanger national security. Whatever the court eventually decides, the episode shows that political power can override a working legal mechanism for accountability, even in a country that has one. India’s data center industry is younger than America’s. It still has room to build accountability from the start.

Legal Requirements

India does have some regulations on paper. Large data centers must go through state-level environmental reviews before construction. However, a 2026 analysis by the Council on Energy, Environment and Water found that out of fifteen states with data center policies, most do not set efficiency standards, limits on water use per megawatt, or require public reporting. For example, when Andhra Pradesh approved a one-gigawatt park at Tarluvada, in the district with the state’s lowest groundwater reserves, the approval documents did not say how much water the project would use.

This is not an argument against the data center industry itself. India wants this growth, and the tax holiday extended through 2047 in this year’s budget is designed to attract large investments from places like Southeast Asia and the Gulf. There is already a better example within India: Meta’s new campus with Reliance in Jamnagar plans to use renewable power and cool its servers with desalinated seawater instead of groundwater, because someone asked the right questions before building. Asking these questions should be a legal requirement, not just a courtesy. Every data center above a modest size (five megawatts is a reasonable limit) should have to publicly report its water and electricity use every quarter, using standard metrics like water usage effectiveness and power usage effectiveness. This reporting should be required for environmental clearance and for getting the tax holiday and state incentives, not just included in a sustainability report that few people read.

Back in Tusiana, the substation keeps humming, and the park is only one data center into a planned six. Five more are coming, on the same aquifer, under rules that still do not require anyone to say how much they take. India’s next technology revolution should not come at the cost of its aquifers. The rules governing this industry must be written before the country's water runs out.

(The writer is an ICSSR Fellow at Govind Ballabh Pant Social Science Institute where his work focuses on environment, climate, political ecology, public policy and governance. Views personal.)