The Cloud Has a Water Bill: NITI Aayog Asks States to Count What Data Centres Really Cost

The Missing Ledger: Why NITI's Data Centre Framework Is Really an Accounting Reform

Here's what's actually happening inside a data centre. Thousands of servers turn electricity into computation and every watt they use ends up as heat. That heat must be removed continuously and in most designs water does the removing. So a data centre is best understood as a machine that converts three local resources into one global service:

• power, for the servers and for cooling - water, to carry the heat away - land, near grids and fibre The computation can serve users anywhere in the world. The water and power are drawn from one district.

Two Numbers That Tell You the Real Cost

The industry measures this conversion with two ratios.

• Power Usage Effectiveness (PUE) divides the facility's total power by the power reaching the IT equipment. The Uptime Institute puts the industry average at about 1.52. That means roughly half as much energy again goes into cooling and overhead as into computing itself.
• Water Usage Effectiveness (WUE) measures litres of water per kilowatt-hour delivered to IT equipment. The global average is estimated at about 1.8-1.9 L/kWh, while highly efficient sites target below 0.4. The analogy of a factory holds up to a point. A data centre consumes inputs and emits waste heat like any plant. It breaks down on the benefit side: a hyperscale facility can be capital-heavy yet employ relatively few people once built. That gap between local cost and local benefit is exactly what the new framework targets. The scale is already real. CEEW estimates Indian data centres used about 150 billion litres of water in 2024. A single 100-MW hyperscale facility can need up to 2 million litres a day for cooling and the CEA projects data centre power demand of up to 17 GW by 2031-32.

What NITI Is Really Asking States to Do

The states have been competing on concessions such as cheaper power, stamp duty waivers and subsidised land. The Centre added a 21-year tax holiday for eligible foreign cloud providers in Budget 2026-27. What was missing was a ledger. The framework supplies three accounting rules:

1. Net value, not gross value. States must show a project's economic benefits after subtracting the land, infrastructure and utility concessions they give away.
2. Water counted across seasons and decades. Approvals should rest on 20-30-year seasonal water assessments, with existing users protected. A facility that looks fine in the monsoon may compete with households in May.
3. Developers pay for their own wires. Grid assets built only for one project should be funded by its developer, not socialised across consumers. Incentives, in turn, can be tied to measurable outcomes: jobs, renewable energy use, efficiency and local procurement. The limit is in the fine print. The document does not say whether it is formally adopted or binding on states. A ledger only works if someone chooses to keep it.