Australia's Foreign Minister Alexander Downer has defended the prospect of the country selling uranium to India.
India currently has 14 nuclear reactors
Although Mr Downer stopped short of officially confirming the news, he insisted such a move would not increase nuclear proliferation.
India is not a signatory of the Nuclear Non-Proliferation Treaty, and Australia has previously pledged not to sell uranium to any nation not signed up.
If the sale goes ahead, it would follow India's similar deal with the US.
First agreed with the White House in March, the US-India deal reverses three decades of American anti-proliferation policy.
Under the agreement, India will gain access to US civilian nuclear technology and uranium and be allowed to reprocess fuel - a move that could theoretically allow India to make more nuclear weapons.
India's nuclear weapon stocks are currently estimated to be between 70 and 120.
Mr Downer told Australia's ABC Radio National that like the US, Australia would demand in return that India opened up its nuclear facilities to United Nations inspectors.
Mr Downer has vowed not to sell uranium to Pakistan
"That, if I may say so, enhances the nuclear non-proliferation regime, it doesn't weaken it," he said.
"This will provide still more safeguards [from India] than we currently have."
Mr Downer added that any delivery of uranium to India would not be followed by similar sales to the other two established nuclear powers not signed up to the Non-Proliferation Treaty - Pakistan and Israel.
"We won't consider selling uranium in Pakistan, because Pakistan has a long record of proliferation," said Mr Downer, referring to the 2005 revelation that Pakistan's main nuclear scientist AQ Khan had given nuclear secrets to Libya, Iran and North Korea.
Mr Downer added that he did not foresee Israel ever seeking Australian uranium, which accounts for 40% of the world's supplies.
Australia's opposition Labour Party, which is riding high in the polls against the Liberal government, said it would cancel any such nuclear deal with India if it won November's general election.
India has 14 nuclear reactors in commercial operation and nine under construction.
Any sale of Australian uranium to India would inevitably anger Pakistan, which has already strongly criticised Delhi's deal with the US, saying it threatened regional stability.