VIENNA – The United States said on Thursday nuclear supplier nations were making progress towards agreement on lifting a ban on trade with India.

Washington had moved to meet objections from some members of the Nuclear Suppliers Group.

U.S. officials, racing to finalise a U.S.-Indian atomic energy deal, have been lobbying others in the 45-nation NSG for a one-time waiver to its rules against doing business with states outside the Non-Proliferation Treaty (NPT).

Barring NSG action in early September, the U.S. Congress may run out of time to ratify the deal before it adjourns at the end of the month for autumn elections, leaving the matter to an uncertain fate under a new president.

Ahead of a two-day NSG meeting that began on Thursday, some members said changes made to the U.S. waiver draft were cosmetic and did not allay concerns the deal could subvert treaties meant to stop the production or testing of nuclear weapons.

In a sign of its desire to save a major Bush administration initiative, Washington sent its No. 3 diplomat, Undersecretary of State for Political Affairs William Burns, to Vienna to head the U.S. NSG delegation.

'We are making steady progress in this process and will continue to make progress,' he said outside the closed meeting.

'And while a number of representatives here have raised important questions that need to be addressed, our discussions have been constructive and clearly aimed at reaching an early consensus,' Burns told reporters. He took no questions.

With the outcome still unclear and likely to require consultations in capitals for a final decision, diplomats said another meeting might have to be held later this month.

Washington and some allies assert the U.S.-India deal will move the world's largest democracy towards the non-proliferation mainstream and fight global warming by furthering the use of low-polluting nuclear energy in major developing economies.

NON-PROLIFERATION STANDARDS AT STAKE

NSG critics fear India could use access to nuclear material markets to indirectly boost its bomb programme and drive nuclear rival and fellow NPT outsider Pakistan into another arms race.

To forestall this, they demanded clauses specifying no trade in the event of another nuclear test explosion, no transfers of fuel-enrichment technology that could be replicated for bomb-making, and periodic reviews of the waiver.

Some diplomats said resistance to the U.S. proposal had been markedly reduced by U.S. insertions into the latest waiver text indicating, though not spelling out, that trade with India would be cut off if it tested another nuclear weapon.

The new version also said that India, to obtain NSG nuclear cooperation, had 'voluntarily' committed to the cartel's guidelines against exporting 'dual-use' enrichment hardware.

Two diplomats in the meeting said the unity of six nations that had spearheaded demands for explicit terms on India trade was cracking and other major nations that had voiced some reservations, such as Japan and Canada, had now dropped them.

But another diplomat said the 'like-minded' bloc of Ireland, Switzerland, Austria, New Zealand, Norway and the Netherlands was holding together, with significant backing from China.

India has ruled out major conditions on an NSG exemption in order to protect its strategic nuclear sovereignty.

But India's ruling coalition is vulnerable to opposition complaints about a 'sellout' of its strategic autonomy in the U.S. deal. It drew renewed fire on Thursday over a leak of secret Bush administration testimony assuring Congress that another test would swiftly stop U.S. nuclear trade with India.

The government refused comment on the leaked testimony and said it stood by its decade-old unilateral moratorium on tests, but that India would retain a right to test should it want to.

(Additional reporting by Krittivas Mukherjee in New Delhi; Editing by Giles Elgood)