Data centres are often described as the factories of the internet. They do not make cars or steel, but they consume electricity on a scale large enough to rival industrial zones. Servers run day and night, cooling systems never really switch off, and a few seconds of power disruption can carry financial consequences. That reality is now pushing Indian states into policy territory they once reserved almost entirely for power companies.
The Andhra Pradesh government has cleared a power distribution licence for an upcoming Google data centre project in Visakhapatnam, according to officials familiar with the development. The move marks a first in India: a private company outside the electricity business being allowed to distribute power for its own large-scale data centre activity under a special policy route.
The approval is tied to a new policy introduced by the state’s Energy Department, which allows strategic data centre projects to receive what are known as Deemed Distribution Licences, or DDLs. The idea behind the policy is straightforward. Data centres consume enormous amounts of electricity and require uninterrupted supply. Rather than depending entirely on existing state distribution systems, qualifying operators can now build and manage their own distribution setup within approved project zones.
The government order driving this move echoes that perspective. It notes that data centres have unique needs for power procurement, distribution, and upkeep, making it essential to allow projects with the right technical expertise to secure distribution licences.
That may sound procedural, but the change is far larger than a paperwork adjustment. Electricity distribution in India has long remained tightly controlled by state-run utilities and licensed power companies. Andhra Pradesh has now opened a narrow but important door for private infrastructure firms to step into that role under specific conditions.
The policy applies only to large projects. To qualify, a single developer or investor must have a connected load of at least 300 megawatts within the state. Companies can combine demand across multiple locations to meet the threshold. The licence also comes with restrictions. Power distributed under the DDL route can only serve approved data centre facilities and cannot be supplied to outside consumers.
In practical terms, the model gives large technology companies greater control over how they source and manage electricity. Under the Andhra Pradesh policy, licensed data centre operators may procure power from a range of lawful sources, including renewable energy plants, bilateral agreements, captive generation units and power exchanges.
That flexibility matters because electricity is one of the largest recurring expenses for data centres. Companies operating hyperscale facilities often seek direct access to renewable energy sources both for cost management and sustainability commitments. Traditional power distribution structures can make such arrangements slower or more restrictive.
The timing of the policy is not accidental. Andhra Pradesh has been trying to position itself as a major destination for data centre investment, especially as artificial intelligence and cloud computing push demand for computing capacity higher. Last month, foundation work began for a major cloud and AI facility linked to Google in Anakapalli district, reportedly involving investments valued at around $15 billion.
Visakhapatnam has increasingly become central to those ambitions. The coastal city already offers access to subsea cable networks, port infrastructure and relatively lower land costs compared with larger metro regions. Reliable electricity remains one of the biggest requirements for attracting hyperscale facilities, and the new licensing model appears aimed directly at that concern.
A New Power Model in India’s Electricity System
The Andhra Pradesh decision is likely to draw attention from both the technology and power industries because it touches a long-running issue in India’s electricity market: who gets to control distribution and under what conditions.
For decades, electricity distribution has largely remained within the domain of state discoms, many of which struggle with debt, transmission losses and subsidy burdens. Large industrial users have often looked for ways to reduce dependence on those networks through captive plants or open access arrangements.
Data centres add another layer to that discussion because their electricity needs are unusually concentrated. A hyperscale facility can consume as much power as a mid-sized city. Even brief outages are costly, which means operators tend to demand multiple backup systems, dedicated substations and uninterrupted supply guarantees.
The Andhra Pradesh policy effectively acknowledges that these projects function differently from ordinary commercial consumers. By allowing direct distribution structures within project boundaries, the state is creating a separate category for energy-intensive technology facilities.
That raises wider questions about whether similar models may eventually spread to other states. India’s push to become a larger hub for cloud computing and AI infrastructure depends heavily on electricity availability. Data centres cannot function with unstable supply conditions, and investors increasingly look for regions where energy access is predictable and scalable.
At the same time, the policy may also trigger debate among traditional utilities. Large commercial consumers are often among the most financially valuable customers for state discoms. If more high-consumption projects begin operating under separate distribution arrangements, state utilities could lose a portion of their revenue base.
There is also the issue of grid management. While the Andhra Pradesh order allows operators to procure electricity independently, these facilities will still remain connected to wider transmission systems in various ways. Managing reliability, pricing and load balancing could become more complicated if such arrangements expand rapidly.
Renewable energy is another major part of the equation. Technology firms increasingly seek direct renewable sourcing to meet climate targets. Andhra Pradesh’s policy explicitly permits procurement from solar, wind and hybrid systems, including battery-backed storage setups. That could encourage private investment in dedicated clean energy generation tied directly to data centre demand.
For India’s energy market, the move signals a gradual shift in how electricity consumption is being viewed. Large-scale computing facilities are no longer treated merely as office parks or IT buildings. They are increasingly seen as industrial-scale consumers with infrastructure demands closer to manufacturing clusters than software campuses.
The policy also promotes competition among states for technology investment. Several Indian states have announced data centre policies over the past few years, offering incentives tied to land, taxes and infrastructure. Andhra Pradesh is now trying to separate itself through electricity policy, an area that investors often consider just as important as tax incentives.
Neither the Andhra Pradesh government nor Google has formally announced details of the distribution licence yet. Still, officials familiar with the matter say the approval has already been cleared under the new framework and public confirmation is expected later.
