With the acquisition, TSIL will enter the steel business.
The CCI in a tweet on Tuesday said it "approves acquisition of steel division of Usha Martin Limited by Tata Sponge Iron Limited".
Deals beyond a certain threshold require approval from the Competition Commission of India (CCI).
Earlier, UML had said the sale of steel business to Tata Steel will help the company in "significant reduction" of its debt.
UML's steel business comprises the specialised 1 mtpa alloy based manufacturing capacity in long products segment based in Jamshedpur, a producing iron-ore mine, a coal mine under development and captive power plants.
Usha Martin is amongst the largest wire rope manufacturers in the world and a leading speciality steel producer in India.