WASHINGTON, July 26: The United States has accepted India’s demand that the supply of nuclear fuel for its reactors will continue even if New Delhi conducted another nuclear test, diplomatic sources said.

The United States and India signed a deal for nuclear cooperation two years ago, which has been endorsed by the US Congress. The deal, however, has not yet been finalised because of differences over US demands that India should not conduct any more nuclear tests and should not use the spent nuclear fuel from US supplied reactors for military purposes. India has conducted nuclear tests twice, in May 1974 and May 1998.

A condition in the draft agreement says that nuclear fuel supplies to India will stop automatically if it conducts another nuclear test.

New Delhi has rejected both demands and until last week Washington insisted that relevant US laws required it to place such restrictions and it could not ignore them.

Last week, senior Indian and US diplomats met in Washington to sort out these differences and said in a joint statement that they were close to doing so.

Meanwhile, sources, when asked to comment on reports in some newspapers that both sides have overcome their main differences, said that the US had agreed to assure India that it would continue to receive fuel for the reactors it bought from the US even if it conducted another nuclear test.