The information and broadcasting ministry is of the view that Media Content and Communications Services, the company that will provide news content to Star News, should not have any foreign equity because it will function as a news agency.
A 1956 Cabinet resolution prevents foreign holding in news agencies and says news agencies should be owned and controlled by Indians.
As MCCS also wishes to provide content to other news channels, the government thinks it is all the more reason to qualify the company as a news agency and it should be brought under the purview of the 1956 Cabinet resolution.
"As per the existing guidelines, an agency providing news should not have any foreign holding. We are of the view that this should be applicable to MCCS as well," said an information and broadcasting ministry official.
An inter-ministerial group set up to look into the uplinking policy is expected to take a view on the issue.
The government is expected to communicate this to Star India during its meeting with company executives later on Tuesday.
When contacted, a Star India spokesperson said he would be able to comment only after receiving a communication to this effect from the government.
A few days ago, Star informed the government that MCCS would provide the news content to the Star News channel, while uplinking and other infrastructure facilities would be owned by Touch Telecontent, a company fully owned by Star.
The government has also raised questions about the various companies involved in the operations of the Star News channel and asked the group to furnish ownership-related details of all the companies.
The companies that have come under the scrutiny of the government are MCCS, Touch Telecontent and Hughes Electronics.
In its last set of queries to Star India, the government had asked the company to clarify who the present owners of MCCS were.
It also raised a question on how the company proposed to raise the paid-up equity of the company from the present Rs 1 lakh (Rs 100,000) to Rs 4 crore (Rs 40 million).