Microsoft is building a data center in a tiny Indian village. Locals allege it’s dumping industrial waste

By 7 a.m. each day, the state-run milk collection center in the village of Mekaguda is busy as dairy farmers stream in to deposit their stocks of raw milk. The 1,000-person village on the outskirts of the Indian tech hub, Hyderabad, is among the district’s top milk producers, and the center collects over 4,000 liters daily.

In recent years, though, dairy farming has become less lucrative in Mekaguda as the cost of growing cattle fodder has gone up due to labor shortages and deteriorating soil quality.

“The villagers are opting to work at [factories] as daily-wage-workers,” said Mohammed Haneef, a 50-year-old farmer who met Rest of World outside the milk collection center in July. “I run a puncture-fixing shop and a general store to feed my three kids now.”

Dairy farmers like Haneef are now worried that their livelihood would be further threatened as a Silicon Valley giant is constructing a data center in Mekaguda.

In March 2022, Microsoft announced that it intended to build a data center on a 22-acre plot in the village. As of July this year, 70% of the construction of the building had been completed, according to the company. However, in July 2023, a group of 56 local residents filed a petition against Microsoft and 35 other companies and government bodies in Telangana’s High Court.

The petitioners claim that Microsoft has illegally occupied land beyond the boundaries of its property and dumped industrial waste into a nearby lake. They blame the local industry for environmental contamination, which they say hurts residents’ cattle and livelihood, and want the government to compel Microsoft and other companies to stop the alleged encroachment.

The hearing for the case is pending.

“These big companies think they can enter small villages like ours, take our land, and destroy it. Build whatever they want wherever they want,” village head Chinthalapally Pandu Ranga Reddy told Rest of World . “The demolition of the building has to happen. It should be torn down. The whole country should know the outrage of us farmers. This should set an example, so they don’t make these mistakes again.” Reddy is Mekaguda’s sarpanch — the elected head of the village-level constitutional body of local self-government.

In its environmental clearance assessment , Microsoft had said that there were no significantly large water bodies within a 15-kilometer radius of its site, “however, many small seasonal lakes/ponds [are] present.”

But the villagers have accused Microsoft of illegally encroaching upon Tungakunta Lake and “using it as a dump yard,” according to their petition.

In response to detailed questions about the villagers’ allegations, Microsoft told Rest of World it has complied with all local requirements and has the necessary permits from the relevant administrative departments.

“Microsoft is committed to building and operating data centers responsibly, for the good of the community,” a company spokesperson said. “We design our data centers to be more water and energy efficient, tend to local ecosystems with restoration projects, and grow the local renewable energy supply.”

Microsoft’s Mekaguda facility is part of the company’s plan to create a massive data center hub in the southern state of Telangana. The data center will be one of six such facilities developed over the next 15 years , according to local reports.

Like many countries around the world, India has made a big push to build data centers to achieve technological sovereignty . According to real estate consultancy CBRE, India has received the second-highest data center investment in Asia, after China. Japan’s NTT Data — one of the world’s largest data center operators — has 18 such facilities in India.

But the race for data centers is taxing on the environment. An average data center consumes 3 to 5 million gallons of water daily, equivalent to what 30,000 to 50,000 people would use. That’s a significant burden in a country like India, which is impacted by heat waves and water scarcity . Protests around the environmental impact of data centers have emerged in drought-stricken Latin American nations Chile and Uruguay .

Microsoft’s Mekaguda data center is slated for completion by 2025 and will employ 180 people when it’s ready, according to a conceptual plan prepared by AECOM, Microsoft’s infrastructure consulting partner for the project.

On July 1, Microsoft’s representatives reportedly informed the Telangana government that the company had “some problems with the local panchayat” (village council). The state’s IT minister tasked the local administrator with resolving the issues “by evening” and urged Microsoft to complete construction by 2025.

When Rest of World visited the village, construction of the factory was well underway, with multiple shifts working around the clock.

On May 2, a judge rejected the petitioners’ request that the court direct Microsoft to “stop the illegal activities” while the case was pending. The judge also called the request “vague.”

A hearing on the entire petition is yet to be scheduled.

According to the petition, which has been reviewed by Rest of World , Microsoft has occupied a pathway just outside the bounds of the property it purchased. The company “illegally occupied the cart-way and constructed a fencing approximately for a length of 380 [meters],” according to the petition.

The petition also says that the software giant has been “causing air and water pollution by leaving their wastage in the illegally occupied Tungakunta Government Lake and Underground borewells, road and cart-way.”

When Rest of World visited the village twice in July, there were pipelines protruding from Microsoft’s boundary wall, which connected to the ground in piles of mud. The area was also flattened, cleared of vegetation, and secured with barbed wire fencing. A “private property” signboard was stuck between the boundary wall and the barbed-wire fence.

Rest of World could not independently verify the function of the pipelines or if the fence had been erected by Microsoft.

Microsoft did not respond to an email seeking details about the pipeline and the fence.

In September 2023, Microsoft responded in court and asked for the petition to be dismissed. The company denied illegally occupying any land or polluting Tungakunta Lake. Microsoft also noted that as an IT company it does not dump industrial waste and does not plan to carry out any manufacturing activity on the land.

Microsoft’s response, reviewed by Rest of World, said that Reddy “indulged in various illegal activities … exploiting his position in the village to gain personally.” Reddy has denied these allegations.

Jasveen Jairath, founding convener of citizens’ initiative Save Our Urban Lakes and a researcher of politics in water management, told Rest of World that corporations like Microsoft “are bulldozing their way [and] the judiciary is extremely weak.”

All water bodies, seasonal or otherwise, are “part of an integrated, interconnected lake system,” Jairath said , adding that under the Telangana state law, water bodies — lakes, ponds, irrigation tanks — have permanently demarcated boundaries that must be honored. The government’s implementation, however, leaves much to be desired . Jairath’s organization has been fighting similar cases in Hyderabad for decades.

Deals with large corporations like Microsoft are a feather in the cap of the local politician, she said, which is why administrators don’t act against potential violations. “The only way this can be resisted is through public hype and public resistance … which, again, doesn’t seem to be happening on an effective scale,” she said.

Jairath said encroachment of lake beds has caused rampant flooding around Hyderabad in the past. Gachibowli, where Microsoft’s Hyderabad office is located, is one such vulnerable area that has seen alleged encroachment from major IT companies and government bodies . In July, the state government admitted to its tourism and hospitality institute building ’s encroachment on a nearby lake and agreed to demolish it.

In June, Microsoft made a worldwide pledge to use 100% renewable energy sources by 2025 and turn water-positive — replenish more water than it consumes — by 2030 at its data centers. In Mekaguda, though, the Telangana government is adding electricity sub-stations and flood-water canals to aid Microsoft’s construction. A new 220-kV grid supply line has been planned to meet the power requirements of the data center once it’s up and running.

Jayesh Ranjan, Telangana’s special chief secretary for information technology and electronic communications, told Rest of World that Microsoft had obtained all statutory permissions, and irrigation officers have been visiting the site regularly to ensure the construction takes place within permissible bounds.

“There is no kind of error or oversight on the part of Microsoft,” he said. “It is not some fly-by-night, local kind of a company. It is a global company with very high compliance standards. Even if the sarpanch or someone else had not pointed out, they themselves do this kind of verification very, very meticulously. So it is very kind of loose and improper to allege these kinds of things.” ▰

Almaas Masood is a journalist and photographer based in Hyderabad, India.

Ananya Bhattacharya is a reporter for Rest of World covering South Asia's tech scene. She is based in Mumbai, India.