The Sri Lankan government has refused to grant permits to Maruti Suzuki India to open a vehicle assembly plant on the island, reported the Sunday Times, dashing the Indian company's plans.

Quoting  Investment Promotion Minister Lakshman Yapa Abeywardena, the Sunday Times reported that foreign manufacturers could not open plants on the island, unless there was “local input”.

The announcement will also affect the local agent of Land Rover Defenders, where plans had been in place to bring in British engineers to help with the production process in their own plant.

Maruti Suzuki India had initially announced it was contemplating setting up a plant in Sri Lanka last year. The company had accounted for almost half of all the vehicles sold on the island from 2011-2012, until the Sri Lankan government raised import duties to combat a rising fiscal deficit, causing exports to drop.

Abeywardena added that a final decision was yet to be taken on whether all foreign manufacturers would be banned, stating that it rests on the report of a committee that the government has appointed.

The latest announcement comes after Indian Prime Minister Narendra Modi held a meeting with Sri Lankan President Mahinda Rajapaksa in Delhi just last week, where Indian projects on the island, such as the Sampur power plant, were discussed. On his return, Rajapaksa reportedly ordered government officials to expedite work on that particular project. Disputes over several issues have led to continuous delays, with an initial MoU having been signed in 2006.