From the turn of the century, Hyderabad has become a booming IT hub. Now, along with gearing up to be an AI hub, the city is prepping to become a major location for data centres, competing with metropolises like Delhi, Chennai, Mumbai, and Bengaluru. How? “Amazon, Tillman, Ursa Clusters, CtrlS, and Sify announced plans for new facilities and expansions,” said one of our recent reports.
To understand the what, how, and why of data centres, CE spoke to industry experts.
“When you visit a website, your device requests data from a server. Servers can be anywhere, even in a company’s office, but running a 24/7 service comes with challenges like maintaining power, internet connectivity, cooling, machine upkeep, and physical security. It’s expensive and complex for most businesses to handle alone. That’s where data centres come in,” explained Kanneganti Ramarao, CTO of Aganitha AI Inc.
He added that data centres offer computing power, storage, and network infrastructure with backup power, cooling, and automated systems. “Most businesses rely on data centres instead of managing their own. When software automates resource management, this becomes the ‘cloud’, allowing companies to rent computing power as needed,” he added.
Telangana is making rapid progress and is ready to house new data centres. Jayesh Ranjan, special chief secretary of the Industries & Commerce (I&C) and Information Technology (IT) departments of the state government, elaborated on the government’s vision, saying, “Telangana is already a prominent IT hub. With the rapid advancement of AI, the state aims to transform itself into an AI powerhouse. We expect 20 more data centres to emerge over the next three years. Data centres are essential infrastructure to support this vision.”
Ideal locations and other requirements
“Data centres are built where costs are low — Nordic countries use natural cooling, while US facilities are near hydroelectric power. They don’t need to be in cities, just near high-speed internet,” emphasised Ramarao, adding that if Telangana develops more data centres, key considerations would include land costs and electricity prices. “Temperature variations matter less since the entire state is warm from a cooling perspective,” he noted.
According to Jayesh, regions like Chandanvelly and Future City are being prioritised for data centre development. There are also plans to establish hubs in Tier-2 and Tier-3 cities to promote balanced regional growth. He added, “Setting up data centres requires two independent power sources for an uninterrupted supply, proximity to substations and power lines, water for cooling, and access to basic connectivity infrastructure.”
Power supply and consumption
As mentioned earlier, an uninterrupted power supply is crucial for data centres. Power consumption varies by server type, scale, and facility design. Standard servers use 100–600 watts, while high-performance computing (HPC) servers can draw thousands. Small data centres, which are 5,000–20,000 sqft with 500–2,000 servers, need 1–5 MW. Large centres, which are 100,000+ sqft with tens of thousands of servers, require 20–100+ MW.
According to the Central Electricity Authority (CEA), Telangana’s peak power demand in 2025 is expected to reach 18,501 MW, with an annual requirement of 97,547 million units, peaking in September. “To meet this demand, the state is expanding substations, power lines, and data centre clusters while promoting clean energy. With Telangana being a power-surplus state and the new Renewable Energy Policy in place, data centres will significantly reduce reliance on conventional power,” said Jayesh.
Policies and frameworks
The special chief secretary said the growing demand for data centres is straining existing infrastructure, with nearby substations nearing capacity, making it challenging to meet power demands in current clusters. Additionally, data centre companies prefer close proximity to optimise operations, complicating land and resource planning.
So, how to attract data centre investments? “Along with a dedicated data centre policy and the recently introduced policy for renewable energy, Telangana also offers infrastructure and power subsidies to meet the industry’s high energy demands. The state has streamlined the regulatory process through its TG iPASS system, offering single-window clearance for all necessary approvals, ensuring a smooth setup process for investors,” he pointed out.
He noted that Telangana’s policies are on par with other tech hubs but stand out by offering customised incentive packages for mega projects, which have already attracted global giants like Amazon and Microsoft to establish some of their largest data centres in the state.
Additionally, he pointed out that data centres will generate employment during both the construction and operational phases. However, the larger employment impact is expected through IT sector expansion catalysed by these data centres.
Long-term viability
However, setting up a data centre isn’t just about constructing a facility — it’s about ensuring long-term profitability, said Ramarao, adding, “Leasing space is an option, but major cloud providers build their own.
A viable model includes hosting smaller businesses and ensuring full utilisation, as servers quickly depreciate. Securing long-term clients — governments, universities, and research institutions — can stabilise demand and create affordable services for startups. Success depends on reducing costs and locking in contracts, fostering a tech ecosystem in the state.”