Karnataka approves Rs 1,300 crore Sustainable Data Centre Policy 2026-31

⚡ Key Financial Takeaways

The policy allocates a revised budget of Rs 1,300.45 crore for implementation over five years.

Karnataka aims to achieve 1 GW of cumulative data centre IT load by 2031.

The state targets 10-12% of India’s total AI-ready data centre capacity.

Implementation will focus on sustainability metrics like Power Usage Effectiveness (PUE) and Water Usage Effectiveness (WUE).

The strategy includes developing regional digital corridors to extend infrastructure beyond Bengaluru.

💡 Why It Matters

This policy is significant as it aligns Karnataka’s digital infrastructure growth with global sustainability standards, a critical factor for international investors. By targeting 10-12% of India’s AI-ready capacity, Karnataka is positioning itself as a primary node in the national digital economy. The focus on expanding beyond Bengaluru also addresses regional development goals and mitigates the risks associated with over-concentration in a single metropolitan area.

Karnataka Launches Five-Year Data Centre Framework

The Karnataka Cabinet has approved the Sustainable Data Centre Policy 2026-31, a strategic framework designed to position the state as a global hub for sustainable data infrastructure. The policy carries a revised budget of Rs 1,300.45 crore for its five-year implementation period, covering investments in data centre units, parks, operators, edge computing facilities, and allied infrastructure such as cable landing stations.

Strategic Targets and Capacity Goals

A central objective of the policy is to reach 1 GW of cumulative data centre IT load by 2031. The state government aims for Karnataka to account for 10-12 percent of India’s total AI-ready data centre capacity. This push is driven by surging demand for computing infrastructure from sectors including artificial intelligence (AI), cloud computing, Internet of Things (IoT), 5G, and global capability centres (GCCs).

Priyank Kharge, the Karnataka Minister for Home, Information Technology, Biotechnology and E-Governance, noted that while the state was an early adopter of data centre policies, the rapid evolution of AI has necessitated a "course correction." The new framework integrates investment facilitation with strict sustainability mandates to address the environmental footprint of digital infrastructure.

Sustainability and Environmental Metrics

The policy places a heavy emphasis on reducing the environmental impact of data centres. Key mechanisms include the mandatory monitoring of Power Usage Effectiveness (PUE) and Water Usage Effectiveness (WUE). The framework promotes the adoption of renewable energy, advanced cooling technologies, and robust water management systems. To support evidence-based site selection, the government will utilize Data Centre Resource Heat Mapping to assess local water and energy availability.

Expansion Beyond Bengaluru

In line with the state’s "Beyond Bengaluru" strategy, the policy seeks to develop emerging regional digital corridors. This approach aims to distribute the benefits of the digital economy across the state, reducing the concentration of infrastructure in the capital. The government plans to establish sustainable data centre zones and parks, along with a Centre of Excellence for Data Centres to foster research and innovation.

Implementation and Incentives

The Department of Electronics, Information Technology, Biotechnology and Science & Technology will anchor the policy's implementation, with KITS serving as the registration interface. Karnataka Udyoga Mitra (KUM) will act as the single-window agency for clearances. The policy offers investment incentives covering capital investment, project establishment, land, connectivity, and green energy. It also aims to strengthen the domestic value chain by encouraging local manufacturing, MSME participation, and skilling in design, construction, and operations.

🏛️ Background & Context

The approval comes amid a nationwide race to build AI-ready infrastructure. Karnataka has previously signaled its intent to map water and energy resources for AI data centres and create a Rs 1,000 crore corpus for startups. The new policy builds on earlier initiatives, such as plans for 1,000 MW data centre parks in Bengaluru, Mysuru, and Mangaluru, and the designation of Mysuru as a second major IT hub.

👁️ What To Watch Next

Readers should watch for the operationalization of the policy, including the identification of specific data centre zones and parks. The rollout of the Data Centre Resource Heat Mapping and the establishment of the Centre of Excellence for Data Centres are key upcoming milestones. Additionally, the extent of MSME participation in the local value chain will be a critical indicator of the policy's broader economic impact.