Suzuki Motor Corp is believed to have reached an agreement with the government on its plans to set up a second Indian factory, which many had viewed as violative of the Japanese firm's existing contract terms with its local carmaking affiliate Maruti Udyog Ltd.

Details of the understanding reached at a meeting between a high-level delegation from Suzuki, comprising MUL chairman S Nakanishi and managing director Jagdish Kattar, and Heavy Industry secretary Adarsh Kishore were not immediately known.

"The controversy has been resolved," said a source, adding the details would be known only after MUL board meets on Thursday on Suzuki's plan to set up another diesel engine unit.

Suzuki had earlier this month said the 250,000-unit per year production line would be jointly owned with Maruti, and benefits from the Indian car market growth would be split between the two companies.

However, it did not provide details of the ownership structure and investors fear Maruti's own growth prospects may be hit.

A statement released to the media after the meeting said Suzuki will set up the diesel engine plant in equity participation with MUL.

"Both sides also agreed that a new automobile assembly plant for manufacture of high end automobile will be set up to meet growing demand of Muruti-Suzuki vehicles in India and abroad," the statement said.

The new corporate entity will share vendor, marketing and servicing network and R&D infrastructure of MUL thus enhancing the value of MUL.

The statement also said that Suzuki was exploring the possibility of further investment in India for setting up a new gear-box manufacturing facility to meet the requirements of Maruti-Suzuki cars in India.