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Canadian Prime Minister Stephen Harper listens to Indian Prime Minister Manmohan Singh during a joint news conference after the G20 summit in Toronto in June, 2010.Adrian Wyld/The Canadian Press

Prime Minister Stephen Harper faces an acid test in his courtship of India as the two countries struggle to rescue a nuclear cooperation agreement that remains stuck at a diplomatic impasse.

With Mr. Harper expected to travel to India in November with a delegation of business leaders, there is growing pressure to break the negotiating logjam and ease Ottawa's traditional non-proliferation safeguards to allow Canadian companies to cash in on India's growing energy appetite.

Two years ago, Mr. Harper announced with great fanfare that Canada and India had concluded a nuclear cooperation agreement that would pave the way for a vast new export business for Canadian uranium and reactor companies – though Ottawa may be overstating the extent of the opportunity. But before any business can commence, the two governments must conclude an administrative arrangement under which Ottawa can account for material supplied to Indian companies to ensure it is used for peaceful purposes.

The Prime Minister's Office is keen to see the final hurdle cleared and the nuclear pact ready for his signature when he travels to India, industry and government sources told The Globe and Mail. But, despite that eagerness to conclude a deal, federal negotiators continue to insist on Canada's right to verify India's handling of any nuclear material provided from this country. India sees that insistence as an unacceptable and paternalistic level of interference, noting that it reports its activity to the International Atomic Energy Agency.

"The governments are not seeing eye to eye on this," said one industry insider with close ties to Ottawa. "It could be a very long time before it's resolved."

In the absence of a deal, Canada will remain locked out of a potentially lucrative nuclear market that has plans for up to 40 new reactors in the next 20 years.

An official at the Department of Foreign Affairs and International Trade would not comment on the state of negotiations, except to say that the government remains committed to safeguards so that "countries making nuclear exports can track those exports and provide additional assurances about their peaceful use."

Ottawa strictly regulates the foreign sale of nuclear material under the Nuclear Safety and Control Act, and would likely be forced to amend those regulations to meet India's demands.

The Harper government recently concluded a nuclear deal with China, which paves the way for Saskatchewan-based Cameco Corp. to sell uranium to the Asia giant. The Conservative government's courting of China has also raised hopes at Mississauga-based Candu Energy Inc. for future reactor sales there. Candu Energy is the former commercial division of Atomic Energy of Canada Ltd., which Ottawa sold last year to Montreal engineering firm SNC-Lavalin Group.

But unlike China, India is still in the process of joining the global nuclear business. After the country surreptitiously used Canadian and U.S. nuclear material to build its first bomb nearly 40 years ago, India remained a nuclear pariah for decades. In 2008, the U.S. brokered a deal at the Nuclear Suppliers Group – the international club of nuclear states – allowing its members to conduct commercial trade with India, even though New Delhi refuses to sign the global non-proliferation treaty.

Both Candu Energy and Cameco are keen to do business with the Indians, and their executives have travelled frequently to the South Asian country to pursue deals. In the meantime, India has signed contracts with Russian, French and South Korean companies to build reactors as part of the country's massive effort to provide the needed electricity to lift its population out of poverty.

Canada is not alone in insisting on safeguards that are tighter than the Indians are willing to accept. Despite paving the way for India's exemption at the Nuclear Suppliers Group, the U.S. still does not have commercial agreements in place and Westinghouse and GE-Hitachi are stalled in their plans to build reactors, due in part to monitoring issues and in part to India's insistence the companies accept liability in any accident.

The Australians only recently agreed to pursue a nuclear cooperation agreement that would allow its firms to sell uranium to India, and is demanding the same monitoring safeguards that Ottawa wants.

Cameco opened an office in New Delhi in September 2009, but three years later, its local president, Chaitanyamoy Ganguly, remains its only employee there.

The Cameco executive said the Canadian company could supply India from its mines in Kazakhstan or purchase uranium from Niger to resell it. But it is waiting for the green light to supply from Canada, and believes the governments' positions can be reconciled.

"I understand from the Canadian side that they are not going to have any intrusive safeguards … They just want a piece of paper from India every year saying, 'Look, this is the material we got of Canadian origin and this is its location,'" Mr. Ganguly said.

"It has now become an ego clash – who is going to break the ice and give up his ego – and in the process we in the business community are suffering," he added.