OREANDA-NEWS. December 26, 2011. Shipping major Bharti Shipyard's proposal to foray into the production of defense vessels and ships is believed to have been rejected by the FIPB, the government body for FDI clearance, Steel Guru reports.

Sources said that the Foreign Investment Promotion Board has rejected the proposal based on objections raised by the Department of Industrial Policy and Promotion.

While the company has not sought any fresh overseas investment, 3.77% of the equity in the private sector shipbuilder is held by foreign entities.

It had sought FIPB approval to undertake additional activities relating to defense production while maintaining the foreign equity holding at the same level.

The regulations allow for up to 26% Foreign Direct Investment in the defense sector, subject to the necessary terms and conditions.

While the Ministry of Defense is understood to have conveyed its no-objection to the proposal, the Home Ministry had suggested a deferment.

The Department of Revenue, however, had said the proposal needs to be examined by the DIPP and the Department of Economic Affairs.

Opposing the proposal, the DIPP said the existing FDI policy called for the largest shareholder of the company being a resident investor with at least a 51% stake.