The Turkish company’s ties with Pakistan have recently flourished, with the latest move having the potential to impact the Indian Navy’s $2billion (£1.6billion) fleet support ships program.
The impact would come as the state-owned Hindustan Shipyard Limited recently chose Anadolu Shipyard as its technology partner.
An Indian Minister of Defence official said the punitive action would bar Anadolu from carrying out any business with Hindustan.
The officials reasoning followed that any such partnership between Anadolu and Hindustan could have grave consequences for India’s security.
The fresh attacks came after Anadolu launched the first of four anti-submarine corvettes for the Pakistan Navy.
Anadolu was expected to make an official partnership with Hindustan under which five fleet support ships would be built for the Indian Navy.
A senior Indian Navy official said: “Involvement of the Turkish defence company will include overseeing construction, detailed manufacturing, engineering, selecting equipment, quality assurance, etc.
“This would mean a permanent presence of Turkish people at HSL yard.
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Among others competing for the contract was Hyundai Heavy Industries of South Korea.
However, the South Korean firm was not selected because it reportedly refused to guarantee the ships would be built in India.
Another fear comes with the fact that the provider of the ships would have endless details about India’s naval fleet, much of which is considered as extremely sensitive information.
The 45,000-ton fleet support ship’s would carry armaments, stores and other essential equipment to support other warships.
An Indian Ministry of External Affairs official said: “India is cautious with any kind of strategic alliance with Turkey because the latter has very close ties with Pakistan.”
India has not formalised defence cooperation with Turkey despite more than 70 years of diplomatic ties.
The fresh attacks from India follow a period of increased tensions with Pakistan.
Last week, Pakistan’s Prime Minister, Imran Khan warned of an impending nuclear war between the two countries at the United Nations General Assembly.
In his speech, Mr Khan insisted that the two states are heading for “a potential disaster of proportions that no one here realises” as he implored other countries to step in to help remedy the potential conflict.
Tensions erupted between the two states when, Indian Prime Minister Narendra Modi revoked Article 370, the section of the Indian constitution which guarantees special status to Kashmir and neighbouring Jammu regions.
The revocation of the special status was based on the rounds to prevent possible acts of terrorism from occurring in the region.
Modi’s comments were in reference to a specific attack, in the Kashmir region which killed 44 India paramilitary.