By Padma Priya J., Partner and Urban Infrastructure Leader, Grant Thornton Bharat LLP
The water sector in India has evolved through multiple transitions ever since it was granted infrastructure status. The priorities of the sector, such as water availability and capital asset creation, have significantly changed, now encompassing water management, sustainability and operational efficiency. Key contributors to this shift, like increasing population, urbanisation and industrialisation, have placed stress on water availability, leading to an unprecedented water crisis. As per the World Bank’s data, India accounts for nearly 18 per cent of the global population but has access to only 4 per cent of the world’s freshwater resources. With rapid urbanisation, although 96 per cent of the urban population have access to water, only 75 per cent have access to sustainable, reliable and good quality piped water supply. With these alarming numbers, India’s water sector stands at a pivotal juncture. With the Sustainable Development Goal 6 score declining from 63 to 89, India is now entering a phase of transition where efficiency and sustainability will need to take centre stage.
The government’s Viksit Bharat @2047 vision is driving economic development, and ambitious road maps are already being developed for investment decisions across several sectors including water. Much success has been achieved in increasing tap water connections to both urban and rural areas through the Atal Mission for Rejuvenation and Urban Transformation and Jal Jeevan Mission schemes respectively. Investments in the water sector have already reached a scale where these schemes have enabled an increase in tap connections to households. This way, the first priority of providing drinking water is largely being met. Other uses of water, such as irrigation, industrial water supply, and water for commercial and other uses, are being met through a combination of fresh and treated water supply. However, concerns rise with regard to the sector’s preparedness to meet the very high water demands from sunrise industries, including data centres.
Data centres as water-consuming hotspots
The data centre sector in India is at an inflection point. India is one of the fastest growing economies for data centres, where the installed capacity in the past six years has increased significantly from around 500 MW to 1.5 GW (Source: JM Financial). Housing currently about 271 data centres spread over 23 million square metres of area, the sector has a concentration of these centres across Mumbai, Bengaluru, Chennai and Hyderabad. By 2030, about 20 per cent of the national income is expected to come from the digital economy (Source: Ministry of Electronics and Information Technology). With such high growth prospects, the availability of reliable and continuous power and water will drive the pace and scale of growth to a large extent.
Data centres globally consume over 560 billion litres of water annually. In India, with the projected data centre growth to be 6.5 GW by 2030 (Source: Colliers), the increase in annual water use is expected to increase from around 150 billion litres to around 358 billion litres. Around 75 per cent of these developments are planned in already water-stressed states like Karnataka, Rajasthan, Tamil Nadu and Andhra Pradesh. A 100 MW facility would require approximately 2 million litres of water per day. Hence, with ambitious plans to develop data centres (under different models, from edge to hyperscalers), water becomes a fundamental ingredient to keep servers and other equipment in data centres cool. While data centres predominantly use potable water, some of them use treated wastewater. The quality of water used for cooling would be decided based on the
sensitivity of the equipment.
With this new sectoral demand for water, the challenges faced by water boards and urban local bodies (ULBs) will only increase, as they will be burdened with ensuring additional supply to cater to the growing demand in a reliable and sustainable manner. It is time for the states to adopt systemic changes by bringing together stakeholders and reinforcing the importance of a reformative approach to water supply. The following action points would drive the needed change.
Adopting Integrated Water Resource Management practices
Combining sourcing and supply of both surface water and groundwater through a basin-level and aquifer-level model, respectively, will be required for holistically planning water supply for drinking, irrigation, industrial and other uses. A basin-level framework should be developed in every state, considering the combined demand for water across all uses. Initially, the approach may seem complex to implement, but a systematic and step-by-step activity plan, starting from the basin level to the household level, will help in addressing the water sector demand gap effectively. The Integrated Water Resource Management (IWRM) framework should also ensure that there is a single interconnected systemic model that is developed linking demand to supply. Climate resilience and early warnings for flooding and other risks should be incorporated, and mitigation measures should be identified. It may also be pertinent to include water reuse and zero liquid discharge from industries within the framework, alongside city-level water budgeting, the creation of digital data systems to monitor demand and supply, and the assignment of decision-making powers to basin-level authorities. Though it may seem complex, the outcomes of the IWRM will far outweigh the hiccups that may arise during its implementation.
Improving operational efficiencies
There is a need for moving away from a “capital investment-centric” approach and adopting a systems-based approach where improved operations and maintenance (O&M) of water assets can help improve the operational efficiency of water utilities and ULBs. Traditionally, utilities have focused on creating more assets to ensure geographic coverage of water supply. Little focus is seen on completing the entire system establishment (including provision of water meters, SCADA systems, etc.) so that losses could be curtailed. Urban areas still have an average of 40 per cent non-revenue water (NRW) levels. Cities’ success has been witnessed through the implementation of metering and collection systems, and creation of digital payment systems for collections, which should move up the value chain to focus on reuse and recycling, as well as reduce the dependency on potable water.
Adopting compulsive reuse practices
The intensification of water demand from sunrise industries is likely due to the concentration of industries in a geographical area. For example, Bengaluru’s water demand will be driven by the number of digital data hubs/data centres planned across the city. As an artificial intelligence (AI)-ready hub, the city is expected to have 10 more data centres added to its already existing list of 32. The provision of water to these centres will be a challenge unless reuse technologies are adopted. Technological advancements and innovations are also driving the water reuse space. The closed-loop cooling system is expected to reduce the use of water for cooling by almost 60-70 per cent, and air-cooling/immersion-cooling methods can reduce water requirements. By integrating treated water into their water demand, industries can unlock the underutilised potential of the wastewater market. Another effective strategy could be the introduction of mandatory wastewater reuse regulations for industries, including the construction industry. All these measures should be initiated at the state level and pushed down to the service providers.
Plugging systemic gaps in state-level policies
Regular updation of state water policies and other policies of the industries that rely heavily on water will help in plugging the gaps around water usage. For example, state data centre policies should involve methodologies for site selection, including those for water supply. For instance, Rajasthan, which is a water-stressed state, has developed an integrated approach where the policy takes into account wastewater recycling, zero liquid discharge, subsidies for adopting green solutions, advanced water management systems and green building standards. This will allow water service providers to align themselves on issues like climate change. States like Maharashtra have also taken water constraints into consideration while developing data centre policies, allowing for better regional balance between development and resource utilisation.
Building institutional capacities and resource planning
Water service providers would need to reorient the mix of resources beyond engineers to accommodate planners, human resource experts, climate finance experts, IT personnel and management experts. This will enable utilities to focus on enhancing their operational efficiency and asset optimisation. Currently, the project conceptualisation and planning process suffers from inconsistencies, where often there is an under/over-sizing of project specifications. These lead to inaccurate cost estimation. After the award of contracts, discrepancies are often seen during implementation, leading to time and cost overruns. With the right resourcing at the planning stage, such discrepancies can be reduced.
Improving operational and financial performance through digital interventions
Many utilities in the country lack a robust IT-based billing and collection system. Dated systems are still being used in smaller towns, making it difficult to assess the actual performance and identify distribution losses. Digitisation would enable the monitoring of infrastructure on a real-time basis, along with the introduction of predictive analysis, installation of digital systems and real-time monitoring systems. With this, governance will improve, and efficient data-based decisions will be possible. If adequate measures are identified and an action plan is implemented, the benefits that accrue are many, such as reduced NRW levels to meet the standard levels of 15 per cent, improved collection, reduced expenditure, increased control on performance and better monitoring. The key is to implement these across the states in a quicker manner and through smart interventions at both the demand and supply sides.
Involving larger stakeholder groups
Economic gains can be achieved only when the buy-in from all stakeholders is received. A comprehensive action plan can be prepared by the service provider by involving the private sector, other department policymakers, technology companies, ULBs and economic development organisations.
Incorporating private finance through PPP transactions
Implementing public-private partnership (PPP) in the water sector is a challenging task, owing to the sensitivities involved around water. Attaching the right and unsubsidised price to water still remains an unacceptable proposition. Therefore, obtaining gains through the right pricing to meet cost recovery levels needs to be carefully planned and executed. Creating an ecosystem around PPP for the water sector will be beneficial. Penalties and incentives would need to be clearly made known to the bidders. Ensuring accuracy in the preparation of detailed project reports also needs attention to encourage private sector participation. Assured source supply, which is often difficult to commit to the private sector, is another limiting factor. One way to circumvent this challenge is to allow PPP in O&M.
Water will continue to be a critical component of daily life. While India has built infrastructure at scale, what is needed now is to shape future requirements through interventions around efficiency, sustainability and reliability.
