Bharti Shipyard's defence plans rejected

Shipping major Bharti Shipyard's proposal to foray into the production of defence vessels and ships is believed to have been rejected by the FIPB, the government body for FDI clearance.

The Foreign Investment Promotion Board (FIPB) has rejected the proposal based on objections raised by the Department of Industrial Policy and Promotion (DIPP), sources said.

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 defence production while maintaining the foreign equity holding at the same level.

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

While the Ministry of Defence 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.

However, no resident investor held 51% of the share capital in this case, the DIPP said while expressing its opposition to the proposal.

The promoter group holds a 44.4% equity stake in Bharti Shipyard.