The deal has been delayed by disagreements over clauses that India says could limit its nuclear weapons programme and impinge on its sovereignty.

Undersecretary of State Nicholas Burns met with India's junior External Affairs Minister Anand Sharma in New Delhi, said Unni Menon, a US Embassy official. Technical-level talks were also held.

"The deal is mutually advantageous," Burns told reporters. "In good spirit we can reach a final agreement."

The agreement would let the US ship nuclear fuel and know-how to India in exchange for safeguards and UN inspections at India's 14 civilian nuclear plants. Eight military plants would be off-limits.

Details were not immediately available on the progress of the talks, which were set to end Saturday.

The nuclear pact is the cornerstone of an emerging partnership between Washington and New Delhi after decades of Cold War wariness.

One of the biggest sticking points has been India's displeasure with a clause that would let the United States halt cooperation if India tests a nuclear weapon.

Some in India also fear the deal could limit the country's right to reprocess spent atomic fuel a key step in making weapons-grade nuclear material and thus hamper its long-standing weapons programme.

American critics, meanwhile, say the plan could set off a nuclear arms race in Asia by allowing India to use the extra nuclear fuel, which the deal would provide, to free up its domestic uranium for weapons.

Burns was visiting New Delhi days before President Bush is expected to discuss the deal with Indian Prime Minister Manmohan Singh when they meet on the sidelines of a G-8 summit in Germany.