India will become the third largest automotive market in the world

India's state-owned steel company SAIL will begin production of automotive steel in a $ 1 billion partnership with ArcelorMittal in three years. A senior government official said this would help reduce imports of high-quality steel as the country ramped up production of cars.

The Steel Authority of India Ltd has approved a joint venture with the world's largest alloy producer, the state-owned steel mill said in a statement.

SAIL said the final agreement with ArcelorMittal would be "finalized in line with financial viability," but steel secretary Aruna Sharma said Friday that the joint venture will begin production in three years.

SAIL and ArcelorMittal signed a preliminary agreement in 2015 to jointly produce 1.2 million tonnes of automotive steel per year, but disagreements over commercial terms have delayed the venture, which will give the Luxembourg-based company a foothold in the fast-growing steel market.

India is committed to partnering with SAIL with ArcelorMittal to reduce imports of high quality auto steel, which mainly comes from Japan and South Korea. India is a major car manufacturer and exporter, and the country is ramping up production as part of Prime Minister Narandra Modi's Make in India campaign.

Maruti Suzuki, Hyundai Motor and Tata Motors are some of the top-selling carmakers in the country. India is projected to become the third largest auto market in the world by 2020, up from fifth now.