Servers running, but snags remain: India’s Data trade faces several pain points

Mar 21, 2022
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India’s data centre industry, though growing at a fast clip and soon to get infra status, is facing quite a few pain points, including power usage rules and a lack of clarity around building codes.


India’s data centre industry is expected to attract investments worth Rs 70,000-Rs 72,000 crore over the next five to 10 years, driven by large corporate groups and Cloud services providers, according to an estimate by ratings agency Ind-Ra.


Much of this growth will be centred around Mumbai and Chennai due to their business and infrastructure advantages, strategic location, and cable landing stations, an analysis by Airtel and realty industry consultancy JLL has shown.


Already, major domestic conglomerates such as Reliance Industries, Bharti Airtel, Adani group, Hiranandani group, and multinational companies such as Microsoft, Alphabet Inc and Amazon Web Services have joined forces with traditional data centre players like NTT, Sify, CtrlS, STT and others to invest huge sums in the data centre space.


The government, too, has made several positive changes to its data centre policies over the years.


Technology industry lobby group Nasscom has also put forth suggestions to the Telecom Regulatory Authority of India (Trai) and the data centre working group of the Ministry of Electronics and IT (MeitY), on how the data centre industry must evolve.


Yet, a lot remains to be done, say stakeholders, as the data centre ecosystem is facing quite a few pain points.


Despite the government, corporations and startups depending heavily on Cloud computing and data centre solutions providers, and the recent budget proposal conferring “infrastructure” status for the sector being unanimously welcomed, issues around power sourcing, captive networks, procuring equipment and ease of doing business remain major irritants.


Industry experts say the restriction on laying captive fibre for data centre use, their heavy dependence on telecom operators, delayed right of way permits, restrictions on power banking and a lack of clarity on building codes and permits for establishing data centres, are slowing the sector’s growth rate.


Power Play


First and foremost, the data centre ecosystem is dealing with “exorbitantly high” power costs, say industry players.


“If we have to set up our own renewable power stations, then the transportation charges paid to distribution companies is very high,” says Piyush Somani, managing director and chief executive of ESDS Software, a cloud solution provider.


“Moreover, because we need 24/7 power supply, we have to pay almost twice the amount,” Somani says.


Renewable energy is not only a cost efficiency metric for the data centre ecosystem but also a sustainability requirement for businesses and clients alike.


To be sure, data centre providers have been working to increase their green power usage through renewable power purchase agreements, power usage optimization measures, and captive power generation, among others.


“We are expanding our renewable energy footprint for our existing data centres in Mumbai and two other greenfield projects,” says MP Vijay Kumar, chief financial officer of Sify Technologies.


This ensures that the company gets access to clean energy at a lower cost compared to traditional energy sources. Further, it helps meet its Environment, Social and Governance (ESG) guidelines and enhances return on investments, he says.


At STT GDC India, 36% of its power consumption is currently being met from renewable energy sources.


“In the last one year, we have signed new renewable energy Power Purchase Agreements to procure 149 million kWh (million units) of renewable energy under captive structure to cater to the company's facilities in Maharashtra,” says Bimal Khandelwal, chief financial officer of STT GDC India


The company is also procuring wind/solar and hydropower from offsite generating plants, under multiple agreements and has procured 156 million units of renewable energy during fiscal year 2021, he says.


Nasscom has, in its recent suggestions to Trai, said that electricity distribution companies have put in various restrictions around the usage of renewable energy, even if procured directly from the power producer. This, it has said, stands in the way of companies meeting their commitments on renewable energy usage.


“Customers are highly conscious of their responsibility towards sustainability and preferably would like to partner with green data centres that focus majorly on eliminating carbon footprint,” says BS Rao, VP – marketing of data centre firm CtrlS.


The average power demand of a district is around 500 megawatts (Mw), while the power demand (critical IT load) of a data centre ranges from 15 Mw to 100 Mw. Such a huge requirement for electricity makes it challenging to build a data centre in a mixed-use power zone or even in an industrial estate, since a power distribution network is generally not designed to meet this kind of demand in such an area, according to Nasscom.


Industry leaders say limitations on maximum capacity for power banking and commissioning power through solar plants as well as delays in getting requisite high tension power connections add to the woes of the data centre sector.


“India has sufficient power generation capacity, but last-mile bulk distribution is affected by feasibility and procedural issues. It is time consuming as well as costly to get two redundant high-tension connections to data centres,” says Sunil Gupta, cofounder and chief executive of data centre provider Yotta Infrastructure. “Moreover, there are limitations on the maximum capacity for banking and commissioning of power through solar plants.”


Infrastructure Issue


The budget has proposed to include data centres and energy storage systems, including dense charging infrastructure and grid-scale battery systems, in the harmonized list of infrastructure. This is aimed at facilitating credit availability for digital infrastructure and clean energy storage.


Industry leaders say though this will help future use cases as the advent of 5G technology requires data centres to extend deeper into the country, delays in the construction of data centres have weighed down on growth plans for the sector overall.


Data centres typically need large, enclosed spaces with massive cooling requirements.


Though they house a fraction of the population meant for commercial buildings, they need to provide storage for power and fuel supplies. Yet, they have been tagged under the blanket commercial buildings code, leading to delays in various safety clearances.


Industry insiders say a dedicated data centre building code will help solve some of the issues.


Gupta of Yotta Infrastructure says the code can define separate guidelines for core and shell construction, fire safety systems, physical security, setback areas, parking requirements, utility buildings, chiller platforms, redundancy of active power feeders, as well as underground storage of bulk fuel.


Nasscom has, as part of the 2021 MeitY working group for the creation of a building code for data centres, been asking for measures to streamline construction-related delays, along with agencies like the Bureau of Indian Standards and the Ministry of Housing and Urban Affairs.


“At the outset, there is a need for clarifications such as those around hosting data with third-party data centres,” says Vimal Kaw, head, Data Centre Services, NTT Ltd. “Other aspects include complex clearance processes, time-consuming approvals, high cost of power, lack of published standards, and the absence of specialized building norms.” While the future of data centres in India will depend mainly on coastal cities with ready access to cable landing stations, JLL says cities such as Delhi-NCR, Hyderabad, Bengaluru, Kolkata, and Pune also stand to benefit.


The Delhi-NCR region’s data centre industry has the potential for large demand from government organizations.


Pune has developed as a disaster recovery location for banking, financial services, and insurance (BFSI) companies due to its proximity to Mumbai.


Bengaluru has a higher proportion of on-premise data centres operated by global inhouse centres of multinational technology firms.


Kolkata is expected to have a new cable landing station in the next few years and is expected to emerge as an important data centre location, it says.


The Covid-19 pandemic has meanwhile provided a good opportunity to take a relook at and redesign data centres of the future, says Rohini Srivathsa, national technology officer, Microsoft India.


“The public cloud market is expected to grow at 24% between 2020 and 2025 and it will be an important part of the country’s digital journey. We will have to make sure that we keep up and build for that kind of demand,” she says.


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