The government today approved Swedish truck major Volvo's FDI proposal to invest 275 million dollar (over Rs 1,150 crore) in their joint venture with commercial vehicle manufacturer Eicher Motors.

"The Cabinet Committee on Economic Affairs today gave its approval to Aktiebolaget Volvo, Sweden, to invest 45.6 per cent in the paid-up equity share capital in a new joint venture company Eicher Motors India Ltd," an official spokesperson said.

While the commercial vehicle business of Eicher Motors Ltd will be transferred to the joint venture company Eicher Motors India Ltd, the sales and distribution network of Volvo India will also be merged with the JV firm, he said.

The approval to bring in the FDI is subject to compliance with RBI and SEBI guidelines, besides subjected to approval of the relevant High Courts for the demerger of distribution business of Volvo India, he said.

"Eicher shall be holding the balance 54.4 per cent equity of the company and shall act as an operating cum holding company," the spokesperson said.

The Finance Ministry had already approved the FDI proposal of Volvo to invest 30 million dollars (Rs 123 crore) for induction of foreign equity up to 8.1 per cent by way of acquisition of shares in EML.

Earlier in May the two partners had formalised the JV. Volvo by virtue of its separate investment in EML for 8.1 per cent stake, would have an economic interest of 50 per cent in the joint venture.