Rate Payer Protection Pledge: An Affirmative Less Talked Middle East War

DR. ASOKE K. LAHA
Chairman-Emeritus and Founder, InterraIT

I have spent quite some time pondering my column for this month. Several ideas have come to me including that of the ongoing war in the Middle East, but I was imbued with a lurking fear that by the time the article sees the light of the day, either in print or digital format, my narratives would become archaic since the war dynamics are of a catastrophic dimension and mostly unpredictable.

I abandoned the idea of writing about the war with hope that it should be over soon since the ordinary people across the world are suffering. Supply chains are affected for almost all commodities, fuel occupying the top slot. Almost all countries are yelling at the top of the voice the limited supplies of fuel, cooking gas, essential commodities including food items since haulage of goods are affected considerably due to closure of Strait Hermes, through which more than 20% of the goods pass through. Some of the food importing countries in Africa and elsewhere are complaining about inadequate food stocks that can last only for a short time.

I have decided to write on a subject that is not discussed much in the media and is oblivion to most of the people. It is about the data centers, which the government announced as a major decision in the last general budget (2026-27). Here again, I want to be politically correct and not join issues with any political parties. I do not feel that by opening up the running of data centres to foreign companies, we are not compromising with political sovereignty nor I do  not think by extending tax holidays to them till 2047, Indian IT companies are put into a disadvantageous position. My apprehensions are different and more to do with economics rather than politics.

Let me explain. I do not know how many of my esteemed readers are aware of or have taken note of the Rate Payer Protection Pledge. It urges America’s largest AI firms to build or procure their  electric  supply for data centers that power AI. The non – binding pledge asks major AI companies including Alphabet, Microsoft, Amazon, Meta, Oracle and XAI to pay the full cost of energy generation and grid upgrades to run their facilities. They are warned not to pass such costs on to ordinary consumers.

What does this mean for these companies? Companies running data centers must cover the additional expenses incurred for such centres. They must finance every additional expense for running and expanding the projects, including electricity and  water, and agree to cover the cost of additional datacenter operating expenses. Firms will finance or build  new  power  generation and delivery infrastructure to support data centers. The other responsibility is training local talents in communities to take up the responsibilities, thereby creating local jobs.

The initiative is part of the broader strategy   to   promote   AI   leadership while addressing concerns about energy affordability. While the pledge has been praised by tech executives as a step toward responsible energy use, some experts remain sceptical as the actual implementation will depend on agreements with utilities and regulators. In summary the growth of AI infrastructure does not burden households with higher electric bills.

Why is this  important  for  India?  Let us scan through some of the initiatives including India's AI strength. Recently, an AI Conference was held in Delhi inviting delegates from over 160 countries, AI expert, social scientists etc, which had unveiled a plan to deepen AI penetration in India and at the same time warding off some of its fallout to insulate the economy from falling job opportunities and to open up innovation and disruption on a mass scale, seen never before.

Also, prior to that, a string of new policies was unveiled to enhance the production of semiconductors by setting up foundries and manufacturing smartphones in the country. Through various schemes, the government is also promoting production of various components and ancillaries that go into the production. Going by the scale in which our ICT production is going up, we will be facing a massive problem of side effects of excessive solid waste and other related issues

The first casualty will be on our environment. For instance, maintaining data centers and setting up production bases for chips need a clean environment. Also, these are energy guzzling industries. Where will we find such large requirement of power to run these units without additional generation? By pinning on the government to invest in energy generation overlooking other pressing sectors is thinly spreading the limited resources which are not the pressing need of the people. Also, such industries need large quantum of water for coolers and other processes, which entails investments.

It is the right time for India to also embark on a similar pledge from industry, particularly the large ones to bear the cost of the projects that are needed to run their establishments without hiccups whether it is for additional energy, water or for other utilities. These multi-billion companies can absorb such costs. This would also help the government spend its budgets directed at the target groups, the vulnerable sections of the society.

I also feel the same set of norms should apply to running data centers, which are now open to FDI investments with additional tax incentives like tax holidays until 2047. Such centres need a large quantum of investment for generating electricity and sourcing water. Let them bear that cost and plug loopholes that tempt them to avail such essential ingredients from the common pool.

The other important area is environment. Excessive use of raw materials and production of ICT devices and equipment will result in a large quantum of solid waste. The OECD countries have come out with their calibrated policy to reduce environment degradation through solid  wastes.  They  have  evolved a norm to recycle 24% of the electronic gadgets through repair and retrofitting and making them reuse. This is a laudable policy that should be adapted in India, where there is a large scope for re-using some of the solid wastes. Also, rare earths like lithium, used for manufacturing batteries for electric vehicles can be recycled to utilize such rare earths, which are again in short supply. These are some of the steps that we can carry out with little effort but with a larger impact.