Australia wants to export uranium to India for power generation purposes after having lifted an embargo in place since 2012.
The deal, discussed by Australia’s Prime Minister Tony Abbott on Wednesday during his visit to India, could replace the exports to Russia, which have been halted due to the Ukrainian crisis.
Australia, believed to hold about 40 per cent of the world’s known uranium reserves, wants to make sure India, known to have nuclear weapons, only can use the uranium for peaceful proposes before signing the deal.
India faces chronic shortages of electricity, and a quarter of its billion-plus population has little or no access to power. Two thirds of India's power supplies come from burning coal, and it is keen to shift the balance towards nuclear over the next few years.
Canberra had previously refused to sell nuclear material to India because it had not signed the Nuclear Non-Proliferation Treaty (NPT).
The Australian government said it was positive enough has been done to prevent India from misusing the nuclear material.
"The negotiations and work that's gone on between authorities in India and Australia have gone on for some years to develop a bilateral nuclear cooperation agreement which meets the international requirements and we are satisfied, our officials are satisfied, that all the requirements have been met," said Australia’s Trade Minister Andrew Robb.
Australia's change of policy regarding India’s civil nuclear programme follows in the footsteps of the USA, who had signed a similar agreement with India in 2008. India is seeking a similar agreement with Japan.
India operates 20 mostly small reactors at six sites with a capacity of 4,780 MW, or 2 per cent of its total power capacity, according to the Nuclear Power Corporation of India. The government hopes to increase its nuclear capacity to 63,000 MW by 2032 by adding nearly 30 reactors - at an estimated cost of $85bn (£52bn).
India has refused to sign the nuclear NPT, arguing it is discriminatory and flawed in allowing only countries which had tested nuclear weapons before 1967 to legally possess them.
Pakistan, Israel and North Korea are the only other non-signatories to the treaty which aims to prevent the spread of nuclear weapons as well as foster peaceful uses of nuclear energy.
Despite its enormous reserves of uranium, Australia, mining some 7,529 tonnes of uranium a year, has no nuclear power plants.
The country has previously been selling uranium to Russia but stopped the exports as part of the sanctions against Russia for its involvement in the war in Ukraine.
"There will be no uranium sales to Russia until further notice and Australia has no intention of selling uranium to a country which is so obviously in breach of international law as Russia currently is," Prime Minister Abbot told parliament.
Australia and Russia signed a bilateral agreement in 2007 enabling uranium exports. Only a small trial shipment of less than a hundred tonnes uranium has been shipped to Russia.