Mainly because of, our own, growing technological needs and increased population. Other reason is to go along with the rest of the world and keeping ahead of other developed nations, we need.
By increasing the Number of IITs from 7 to 12 it does'not dilute the quality. Our population has grown up 3 folds and technological requirements have increased many folds.
Instead of converting the existing Regional Engineering colleges to IITs, it is better to create new ones.