Chip makers want long-term deals for assured and uninterrupted power and water supplies | Photo Credit: guirong hao

Richa Mishra

India has achieved a massive total power capacity of over 446 gigawatts, but this may not be enough to anchor its semiconductor ambitions, as semiconductor fabrication demands a level of grid perfection, environmental stability, and resource volume that the current infrastructure may not be structurally equipped to deliver seamlessly.

It is evident that the semiconductor and the energy policies are intrinsically linked to national energy objectives. It is natural for semiconductor and energy policies to overlap, considering a standard 300mm chip factory draws hundreds of megawatts of power.

The other side is power delivery. India’s power delivery network leaves much to be desired as transmission losses stand at 20-22 per cent.

A standard silicon fabrication plant requires 99.9999 per cent power uptime (known as the “six nines” standard), according to information available. In advanced manufacturing, a voltage micro-fluctuation lasting even a fraction of a milli second can lead to entire batches of multi-million dollar silicon wafers becoming completely useless.

Despite India becoming a power-surplus nation, its regional distribution grids remain vulnerable to unpredictable voltage sags, surges, and frequency fluctuations. Consequently, mega-projects require highly expensive, industrial-grade backup systems and massive dedicated substations to ensure operational stability. Global tech companies want environmentally friendly supply chains. India wants to use green energy for its new chip factories, but this creates a major problem:

The gap: Solar and wind power are unpredictable. Chip factories must run non-stop, 24/7/365.

The cost: India cannot store enough green energy yet. Building enough massive, expensive battery storage to run a factory purely on renewables is currently impossible. If this was not enough, there are issues of high tariff and cost competitiveness. Semiconductor manufacturing is heavily capital-intensive, and energy costs make up a massive slice of operational overheads. Electricity is one of the biggest costs for these factories. However, power prices in India change too often because factories pay higher rates to help cover cheaper power for farmers.

To compete with countries such as Taiwan, factories need long-term deals that guarantee cheap electricity. Power tariff structures across States can vary due to State regulatory commissions’ rules, or cross-subsidy surcharges (where industrial users pay higher rates to subsidise agricultural sectors).

Water needs

Then there is massive water burden as producing ultra-pure water is intensely energy-demanding.

To transform standard municipal or river water into the zero-contaminant UPW required to wash silicon wafers, it must pass through extensive multi-stage reverse osmosis, deionisation, and filtration systems. This process consumes vast amounts of electricity on top of the fab’s baseline manufacturing load. Power grid problems are a worldwide phenomenon. So governments need to put in place private-sector-friendly policies that allow companies to bypass the old infrastructure and adopt modern solutions, similar to what happened in the mobile industry.

What is needed is a targeted, local infrastructure strategy that turns big policy goals into seamless, on-the-ground resource delivery. To compete effectively with global hubs such as Taiwan, South Korea, or the US, India must merge its energy and semiconductors policies into a single, synchronised industrial blueprint.

Some players believe, India can fix this by completely separating chip-making hubs from the public power grid. State governments must build independent, heavily protected power corridors for manufacturing hubs like Dholera in Gujarat and Noida in Uttar Pradesh. Chip factories must be built right next to their own dedicated power plants. These hubs should mix non-stop nuclear or natural gas power with massive industrial backup batteries to smoothly handle even split-second drops in voltage.

To run non-stop factories on unpredictable green energy, India must update its power market rules. Regulators need to offer rewards to energy developers who mix solar and wind power with water-storage dams and massive battery networks.

Central and State policies must eliminate cross-subsidy surcharges and inter-State transmission fees specifically for semiconductor facilities. This will allow chip factories to buy cheap, green energy directly from anywhere in the country via long-term, fixed-tariff VPPAs.

The Centre recognises that building a self-sufficient chip industry is time consuming. It is actively using international partnerships to protect its supply chains from energy and material shortages by going for global agreements like the Minerals Security Partnership (MSP) and the US-India Critical Minerals Cooperation Framework ensuring long-term access to essential raw materials like gallium, indium, and rare earth elements.

These materials are vital for advanced chips, solar panels, and wind turbines. Forming joint ventures with foreign tech leaders targets the deployment of energy-efficient tools. This directly lowers the massive amounts of baseline electricity and water needed to manufacture silicon wafers.

The policy framework for semiconductor players sourcing energy in India operates as a dual-tiered system governed by Central mandates and executed via State-level policies. The India Semiconductor Mission’s (ISM) aim is to insulate high-tech manufacturing from grid vulnerabilities while lowering operational costs through extensive fiscal relief and renewable integration.

By protecting chip factories from power grid problems and reducing water and energy use, India can build a globally competitive semiconductor industry. It has to be a market driven reform.

Published on June 10, 2026