Mumbai: India’s booming data centre and artificial intelligence (AI) sector is hitting a power hurdle. Backed by massive global funding, these huge facilities are expanding beyond the metros into smaller towns, making the power grid infrastructure—transmission lines, transformers and substations—struggle to keep pace.
Over the past 12 months, domestic conglomerates, Big Tech firms, such as Google, Amazon, Microsoft and Meta, and standalone operators have committed over $250 billion to build new data centre capacities across the country.
On 27 July, the power ministry informed Parliament that data centres are projected to add 26.3 gigawatts (GW) of load to the national grid by fiscal year 2032, emphasizing the urgent need to expand infrastructure.
To be sure, India’s operational data centre capacity was 1.12GW as of June 2025, according to a report by real estate consultancy Jones Lang LaSalle (JLL), published in October 2025.
For operators, the primary operational bottleneck has shifted from land to power. "Securing adequate, reliable, and scalable power has become increasingly challenging," said Sunil Gupta, chief executive of Yotta Data Services, the Hiranandani Group's hyperscale data centre and AI infrastructure arm.
"The most significant delays come from constructing high-voltage substations and transmission lines, which require their own land acquisition, right-of-way clearances, and regulatory approvals across utilities and local authorities," Gupta added.
Addressing these bottlenecks will come with a massive price tag, with the net investment likely to run into “a few lakh crore rupees", said Sridhar Pinnapureddy, chief executive of CtrlS Datacenters, a Hyderabad-based data centre operator.
The cost-sharing model varies across states. State distribution companies (discoms) typically fund substations—unless built inside a data centre campus—while developers pay for transmission lines, step-down transformers, and internal campus cabling.
State of play
This crunch in national grids is already playing out at the state level. In Odisha, while current power infrastructure can handle existing demand, upcoming projects are pushing the grid to its limits. The state has enough infrastructure to support up to 80 megawatts (MW) of data centre load, but "scaling to hyperscale campuses will demand entirely new transmission infrastructure," said Hemant Sharma, Odisha's additional chief secretary for industries.
Since releasing its data centre policy in April 2022, Odisha has drawn significant technology investments. Key projects include a ₹14,257 crore AI-ready data centre setup by IT giant HCLTech and unicorn Sarvam, an ₹800 crore investment by the Adani Group of a small data centre in Bhubaneswar, and smaller sites such as CtrlS’s 5 MW unit in Chandrasekharpur and Airtel subsidiary Nxtra’s 1 MW facility.
Now, the state is racing to install power infrastructure that this data centre expansion requires. Sharma told Mint that Odisha is currently installing a 400 kilovolt (kV) power substation, work on which “is expected to be completed in 12-14 months”.
“We’re then installing a new 765kV power grid, which will take roughly 2.5-3 years to build," Sharma added. High-voltage power substations are crucial for running power-hungry facilities such as data centres without sapping the electricity meant for consumers and other industries. Substations are built at high-voltage standards such as 400kV and 765kV, as higher-voltage power supply stations ensure long-distance, high-efficiency power supply, low currents, and minimal losses.
Odisha is not the only state that has acknowledged its shortage of power transmission infrastructure.
A senior official at the Maharashtra State Electricity Transmission Co. Ltd (MSETCL), who requested anonymity since he was not authorized to comment officially, said the state’s current power transmission network “cannot support the scale of demand being sought by AI developers”.
"With the existing network, if a data centre wants 500MW or 1GW of power capacity within a year, that demand can’t be met. Mumbai's total demand currently stands at close to 4.5GW; supplying the next 5GW would need new 400kV and 765kV substations, and high-voltage transmission lines. Building this would take 4-5 years," the official said.
The Maharashtra government is now working to meet this demand. On 13 March, Bajel Projects Ltd, formerly the engineering, procurement and construction (EPC) arm of Bajaj Electricals Ltd, announced a deal worth over ₹700 crore from MSETCL to establish a 400kV power substation along with transmission lines in two years.
Bajel Projects also won a ₹100 crore contract from Tata Power for additional power infrastructure from an existing substation on 16 March, a ₹300 crore, two-year contract for a 765kV substation from PowerGrid Corporation of India Ltd (PGCIL) on 13 May, and another ₹400 crore, two-year deal from an unnamed data centre company for a 400kV substation on 3 June—all in Maharashtra.
In short, public and private firms have poured ₹1,500 crore into upgrading Maharashtra’s power infrastructure over the past four months—a critical boost for the state, which is India’s largest data centre hub. The Maharashtra government said in March it has signed memorandums of understanding (MoUs) for ₹5 trillion of investments. The state is expecting additional 5GW by 2030.
A senior official at Tamil Nadu Generation and Distribution Corporation (Tangedco), who also requested anonymity, said that apart from a power infrastructure shortage, Chennai, which is India’s second-largest data centre hub, faces another major challenge: land for new substations.
“Existing data centres are accommodated, but expanding capacity takes years as land for new substations is scarce," the official said.
Mind the gap
This mismatch between project construction and grid readiness is becoming acute. Sabyasachi Majumdar, senior director at credit rating firm CareEdge, said, “Today, data centres are ready in 12-18 months and solar farms in 18-24 months. But transmission infrastructure still takes 3-4 years, which is why regulators, discoms, transmission utilities and private companies need to plan long-term.”
The surge in AI applications is compounding the problem.
A July 2026 report by consulting firm KPMG said the rise of AI workloads is expected to sharply increase demand for higher-capacity electrical infrastructure. AI racks typically require 50-60kW of power each, compared with 8-12kW for conventional data centre racks, necessitating heavier-duty power distribution equipment and stronger grid connectivity. Analysts say the biggest constraint has shifted to power transmission infrastructure, which is struggling to keep pace with the scale of AI data centre investments.
“In Q1FY26, India curtailed about 300GWh of renewable electricity as the transmission network could not carry it where it was needed. That challenge becomes more acute when AI campuses require hundreds of megawatts of uninterrupted power around the clock,” said Vijay Agarwal, managing director at brokerage firm, Equirus Capital.
"Power reliability and interconnection throughput are now the primary differentiator—ahead of land and headline incentives, because incentives have largely converged across states while grid delivery hasn't," he added.