India has strongly urged Australia to change its nuclear policy and supply uranium to power its booming economy.
The move puts the Howard government in an awkward position - either offend a rising power and important trading partner, or protect the sanctity of a policy other countries are abandoning, Fairfax newspapers say.
Australia prohibits the sale of uranium to non-signatories of the nuclear non-proliferation treaty (NPT).
Prime Minister John Howard is understood to be open to change, but it is believed Foreign Minister Alexander Downer is opposed, the newspapers say.
The US Senate is expected to decide this week to dump such a policy and pursue a new nuclear co-operation deal with India.
Two senior Indian government officials have made it plain Australia should also change its policy.
Once the legislation is through, we would hope that Australia could push itself - and push the Nuclear Suppliers Group - to supply us with uranium and state-of-the-art technology, M K Narayanan, the national security adviser to Prime Minister Manmohan Singh, told Fairfax.
The US, Russia, the UK have recognised why we need nuclear energy and they are going out of their way to assist, and we would hope that Australia would see it, he told Fairfax. A friend in need is a friend indeed - that's the bottom line.
India, which has displaced Britain as Australia's No 4 export market, would not be pleased if Australian refuses. Certainly, India would feel unhappy at the turn of events. We would see it as a turndown, Mr Narayanan said.
Sanjay Baru, Mr Singh's spokesman, said: It's certainly not something that would spoil the relationship, but it would not be normal for Australia to have a relationship with China in this area but not with us merely because of the NPT.
Dr Baru said Mr Singh planned to visit Australia, probably next year.
Australia decided to sell uranium to China, an NPT signatory, after it agreed to a series of safeguards.