The Cost Of Computing

India’s Energy Reckoning In The Age Of AI

By Govindraj Ethiraj

When OpenAI abruptly pulled the plug on its highly touted video-generation platform, Sora, last week, the tech world was jolted.

But the reason for its demise was a lesson in hard economics: the app was bleeding cash.

Sora’s daily inference costs — the raw computing power required to run the engine — were estimated at a staggering $15 million, driven overwhelmingly by energy consumption. Its lifetime revenue? A meager $2.1 million.

OpenAI may have shuttered Sora to pivot toward robotics or because it recognised that chasing ever-more-complex models yields diminishing returns.

Yet, the underlying truth remains: even as models become more efficient, the relentless demand for faster, more intense computing will invariably drive energy consumption higher.

This reality check arrives precisely as India is throwing its weight behind the Artificial Intelligence arms race.

India has boldly outlined a $200 billion pipeline for data center investments.

This is on top of multi-billion-dollar pledges from tech titans like Google, Microsoft, and Amazon, alongside domestic giants Adani and Reliance, who are erecting sprawling new facilities across the western and eastern parts of India.

But beneath the techno-optimism lies a glaring vulnerability.

Fragile Digital Future

The math of data centers is measured not in square footage, but in power consumption. A 10-megawatt (MW) facility means it continuously draws 10 MW of electricity.

As of early 2026, India’s operational data center capacity has crossed 1.5 gigawatts (GW).

Here is where the strain becomes evident. Over half of that 1.5 GW capacity is clustered in and around Mumbai.

That equates to roughly 750 MW of data center infrastructure situated in a metropolis whose total power consumption hovers around 4 GW.

While the actual power draw may currently be closer to 500 MW, the projections are ambitious: reports suggest Mumbai could see its data center capacity explode to 3.2 GW in the coming years.

Powering these massive server farms — whether through the Maharashtra state grid or new dedicated power plants — will require a mix of thermal, gas, and renewable energy including solar. And perhaps supplemented by nuclear power.

India’s installed power capacity sits at a formidable 524 GW, but the demands of a rapidly growing economy are insatiable.

Incidentally, India has a total non-fossil fuel capacity of around 262 GW of which around 132 GW is solar.

But as we know, solar power serves daytime needs, and the technology to store that electricity at scale for nighttime release remains elusive. Mumbai’s own generation, including Tata Power’s Trombay unit, is heavily reliant on coal, much of it imported.

Now comes the point.

If the geopolitical chaos of the last month has taught us anything, it is that energy flows cannot be taken for granted.

Gas Goals Meet Reality

India is currently facing a massive gas shortage, affecting both the Liquefied Petroleum Gas (LPG) produced by refineries and the Liquefied Natural Gas (LNG) extracted from oil wells.

With Qatar’s LNG production completely offline, it may be years before global supplies fully recover.

Incidentally, Qatar used to feed around 20% of the world and 80% of Asia’s LNG requirements.

India had deliberately steered its economy toward gas, achieving a 6% share in its energy mix with ambitious targets of 15% by 2030.

That goal now looks highly unlikely.

Energy is fungible; if the economy cannot run on gas, it must pivot back to oil, coal, or renewables.

Over the past month, possibly hundreds of thousands of Indian households and commercial eateries have switched to electric induction heaters or revived the use of kerosene — a fuel the government had spent years successfully phasing out.

Even if Middle Eastern energy supplies were to miraculously come back online in the short term, nations like India must fundamentally prioritise their energy needs differently.

Remember, we import 90% of our crude oil requirements, 60% of our LPG needs of which 90% came through the Strait of Hormuz and 50% of our LNG requirements, of which 40% came from just Qatar and thus the Strait.

Domestic Energy in Flux

As the current crisis took hold, the Indian government made the necessary, albeit painful, choices. It prioritised domestic consumers relying on piped LNG, abruptly cutting supplies to industries — like ceramics manufacturing — that had fully transitioned to gas-only operations.

Refineries were directed to alter their output, maximising the production of butane and propane for domestic LPG while restricting commercial LPG supplies. In a stressed environment, the basic needs of citizens (who also happen to be voters) will always be served first.

All of this has worked, up to an extent.

There will be painful readjustments in the near to medium term but the economy will cope.

But this is also a good time to start thinking.

Should it abandon its ambitions to build data centers or relook at some of its energy intensive growth ambitions ?

Not necessarily. But it presents a critical moment for introspection regarding the nation’s energy planning for the next decade.

Policymakers must ask hard questions: How do we engineer a system of incentives and disincentives that prioritises our most critical applications for both consumer survival and industrial growth?

These are not simple equations, and they will require rigorous, unsentimental scenario mapping.

Failure to do so risks a dystopian outcome.

India cannot afford to funnel scarce electricity into, for example, hyperscale AI platforms while significant swaths of the country are forced to return to burning firewood just to cook their daily meals.

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Rs 1.75 lakh crore

That’s the decline in the market capitalisation of India’s 10 top most firms, reflecting broader weakness in equities during a holiday-shortened trading session last week. Benchmark indices slipped as global volatility and geopolitical tensions weighed on investor sentiment.

Laggards:

• Reliance Industries: m-cap dropped by about Rs 90,000 crore

• HDFC Bank: m-cap fell by about Rs 37,000 crore

• State Bank of India: m-cap declined by about Rs 35,000 crore

• ICICI Bank: m-cap slipped by about Rs 16,000 crore

• Bharti Airtel: m-cap fell by about Rs 13,000 crore

• Hindustan Unilever: m-cap declined by about Rs 11,000 crore

• Tata Consultancy Services: m-cap dropped by about Rs 10,000 crore

Winners:

• Larsen & Toubro: m-cap rose by about Rs 18,000 crore

• Bajaj Finance: m-cap increased by about Rs 9,000 crore

• Infosys: m-cap added about Rs 6,000 crore

Context: Analysts attributed the decline to a mix of global and domestic pressures. Rising geopolitical tensions in West Asia, concerns around crude oil prices, and persistent global uncertainty have kept investors cautious. At the same time, fluctuations in the rupee and profit booking after recent market highs have added to the pressure.

Regional Powers Push Peace

Diplomatic efforts to resolve the month-long West Asia conflict intensified as Pakistan hosted foreign ministers from Saudi Arabia, Turkey, and Egypt on Sunday. The meeting reportedly focused on a high-stakes proposal to form a multinational consortium to manage and reopen the Strait of Hormuz, potentially using a Suez Canal-style fee structure.

This push for maritime stability comes as Iran warns of a response, accusing the US of preparing for ground assaults, even as Yemen’s Houthis expanded the scope of war by launching their first strikes against Israel since the conflict began, Reuters reported.

Catch up Quick: Amidst this volatility, India has successfully navigated the energy chokepoint, with the government confirming that two LPG tankers — BW Tyr and BW Elm — have cleared the Strait of Hormuz and are due in Indian ports by early April. These vessels are among several Indian-flagged ships coordinating transit through the non-hostile corridor.

Despite the broader disruption, which has halted 20% of global oil flows, the government said it continues to prioritise regional energy security, underscored by its emergency shipment of 38,000 MT of fuel to Sri Lanka on March 28, Economic Times reported.

Setting: While eighteen Indian-flagged vessels remain in the Western Gulf, the ministry reports that domestic port operations stay normal.

Banks Vs RBI Rules

India’s largest lenders, including State Bank of India, HDFC Bank, and ICICI Bank, along with global banks such as JPMorgan Chase and HSBC, have urged the Reserve Bank of India (RBI) to ease new currency exposure rules. The central bank recently capped daily onshore rupee positions, effectively curbing a popular arbitrage trade between domestic and offshore markets.

Flashpoint: Banks now face the prospect of unwinding positions worth up to $30 billion, raising the risk of losses and volatility in currency markets. Lenders argue the sudden shift disrupts treasury operations and market-making activity.

Catch Up Quick: The RBI introduced the curbs to reduce speculative positions and stabilise the rupee amid global uncertainty, including rising oil prices and geopolitical tensions. However, the move has created near-term pressure, with banks scrambling to adjust positions before the rules fully take effect.

War Fears Trigger Exit

Foreign portfolio investors (FPIs) pulled a record Rs 1.14 trillion ($12.3 billion) from Indian equities in March, marking the worst monthly exodus in history. Surpassing the previous October 2024 low, total 2026 outflows have now reached Rs 1.27 lakh crore. This aggressive selling follows a brief February rebound, as geopolitical instability in West Asia triggers a global risk-off sentiment.

Overview: Market experts cite escalating crude prices, a weakening rupee, and fears of declining Gulf remittances as primary drivers. Additionally, elevated US bond yields have diverted liquidity toward developed fixed-income markets.

Future: While domestic valuations have corrected, they remain high relative to emerging market peers, prompting selective profit-booking. Analysts warn that with one trading session remaining, the historic sell-off could extend further.

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