Tony Abbott Narendra Modi
Australia's prime minister Tony Abbott and his Indian counterpart Narendra Modi after a signing agreements in New Delhi. Reuters

Australia has sealed a deal to sell uranium to nuclear-armed India for peaceful power generation, and has also offered to increase exports of conventional fuel to help Asia's third-largest economy plug chronic electricity shortages.

India is the first customer to buy Australian uranium without being a signatory to the nuclear Non-Proliferation Treaty.

Energy-starved India, where coal-fired power plants supply about 70% of the country's electricity, is looking to reduce its dependence on the fossil fuel.

A nuclear deal will aid New Delhi's efforts to boost nuclear capacity to 63,000 MW by 2032, from 4,780 MW at present, at an estimated cost of $85bn (£52bn, €67bn).

But with latest data showing that half of the country's thermal power plants are down to a week's coal stock, more coal is desperately needed.

"We signed a nuclear cooperation agreement because Australia trusts India to do the right thing in this area, as it has been doing in other areas," Australia prime minister Tony Abbott said after he and Indian prime minister Narendra Modi signed a safeguards pact to sell uranium for power generation.

India fuel imports 'imperative'

"That is why we are happy to trust India with our uranium in months, years and decades," Abbott added, Reuters reported.

A brief description of the accord, issued by India's foreign ministry, said: "The agreement will promote cooperation in the field peaceful uses of nuclear energy. It recognizes India's commitment and use of nuclear energy with a view to achieving sustainable development and strengthening energy security.

"Australia can play the role of a long-term reliable supplies of uranium to India. It provides for the supply of uranium, production of radio isotopes, nuclear safety and other areas of cooperation."

Industry lobby group Assocham's president, Rana Kapoor, said in a statement: "While Coal India can be asked to step up its production, the growing needs make it imperative to go in for more imports… and what better source than Australia whose top leadership is engaged in a strategic relationship with India."

India has nuclear energy pacts with 11 nations and imports uranium from France, Russia and Kazakhstan.