NEW DELHI - Terrorist threats and civilian nuclear commerce performed a delicate dance Tuesday as the prime ministers of Canada and India pledged mutual co-operation on a pair of hot-button issues that could bedevil a renewed Indo-Canadian relationship.

Stephen Harper, near the end of his first visit to the South Asian giant since assuming office four years ago, sat down with Manmohan Singh to face a two-question news conference that managed to link two seemingly disparate issues.

The meeting came as India was putting its nuclear facilities on alert due to intelligence linked to a Pakistani-Canadian being held on terrorism charges in the United States.

So while Indian news media asked Harper, in effect, about the troubling case of Tahawwur Hussain Rana, Canadians were questioning how the case impacts on a looming renewal of civilian nuclear trade with a country that holds a rogue atomic arsenal.

India - which has never signed on to the Nuclear Non-Proliferation Treaty -used Canadian nuclear know-how to secretly build and test its first nuclear bomb in 1974, a development that soured relations for almost two decades.

"We are not living in the 1970s. We are living in 2009," Harper said at a joint news conference with Singh in New Delhi.

"Notwithstanding the challenges that face this country in the neighbourhood in which it lives, this is a stable and reliable friend of our country and we have no reservations pursuing this kind of (civilian nuclear) agreement."

Elected leaders seldom discuss terrorism cases in public, but Singh and Harper both publicly acknowledged they had discussed the Rana case.

Singh called it "a very fruitful discussion in expanding areas of co-operation between our two countries in dealing with the international scourge of terrorism."

Harper said Canada has been working very closely with the Americans on the case, adding "we are certainly resolved to co-operate closely in the future and exchange information on these matters," with India.

Indian reports published Tuesday cited government sources as saying that fears of a nuclear power plant being targeted arose after the FBI reportedly found maps and documents in the possession of Rana and his alleged accomplice David Headley.

Headley has been accused in India of helping plot last November's terror attacks in Mumbai. The new intelligence, according to Indian reports, suggests he visited Gujarat, Maharashtra and Uttar Pradesh, all of which have nuclear installations.

Both Rana and Headley are being held in Chicago in an unrelated terrorism case.

When Rana was first taken into custody in the U.S. late last month on that case, his lawyer, Patrick Blegen, told court that family members in Canada were willing to post "what amounts to their life savings" in order to get him out of federal custody as he awaits trial.

U.S. authorities allege Rana provided travel services and help to Headley as he scouted out the offices of Denmark's Jyllands-Posten newspaper, which outraged hardline Muslims by publishing a series of cartoons in 2005 that depicted the prophet Muhammad, something that's strictly forbidden under Islamic law.

"There is no proof that allegations of murder or blowing up a building would ever be tied to Mr. Rana," Blegen said during the detention hearing.

Rana is not facing any charges in the United States in connection with claims in the latest Indian media reports, and his lawyer could not immediately be reached to comment on them.

Harper assured his Indian audience that Canada is taking matters seriously.

Seated next to the first Sikh prime minister in India's history, he delicately reminded the audience that Canada's worst terrorism incident was the 1980 bombing of an Air India flight out of Vancouver that took 329 lives, mostly Canadians. That attack was carried out by Sikh extremists that Canada has never managed to prosecute.

Harper also noted that two Canadians died last November in the terror attacks on Mumbai by Muslim extremists.

"So we are countries that have felt the pain of terrorism together," he said.

While the allegations about targeting of Indian nuclear facilities are speculative and cloaked in official secrecy, any questions about Indian nuclear security only serve to highlight an already deeply sensitive Canada-India issue.

The Harper government announced last January it was pursuing nuclear technology trade through a formal civilian commercial agreement, but many months later a deal has still not been completed.

Singh noted his country already nuclear technology deals with the United States, Russia and France.

Yet the issue apparently remains politically sensitive for the Conservatives.

A luncheon meeting Tuesday between the prime minister, Indian and Canadian nuclear business leaders and Indian government officials was not included on the highly detailed media itinerary provided to Canadian reporters travelling with Harper. No photo opportunity was arranged.

Hugh MacDiarmid, the president and CEO of Atomic Energy of Canada Ltd., was part of the luncheon meeting with Harper, but neither government nor business leaders were disclosing what was discussed.

However MacDiarmid did tell The Canadian Press that his understanding is there are "no fundamental obstacles" remaining on the nuclear co-operation deal.

While stressing he is not privy to the negotiating details, MacDiarmid said he believes the remaining differences are "relatively modest and can be bridged."

He would not offer an opinion on whether Canada's past relationship with India may be complicating the negotiations.

"I'm a commercial guy running a business, I'm not a diplomat," he said.

ACEL has long-term hopes of selling another reactor to India, but in the meantime is working on contracts to service the existing Indian fleet. "That's a pretty easy one," said MacDiarmid.

More complicated is the issue of Canadian uranium sales to India.

India has limited domestic uranium supplies of its own. Non-proliferation critics say any renewal of uranium imports from Canada or elsewhere - regardless of an airtight civilian agreement - would free up the Indians to use their domestic product in armaments.

Indian reporters leaving Tuesday's news conference were heard grumbling about the tenor of a Canadian media question that raised what they consider ancient nuclear bad blood.

Yet questions remain since no one in the Canadian government is explaining what exactly is holding up the finalization of the type of Canada-India commercial nuclear deal already signed by our closest ally, the United States.

Canada did sign a deal Tuesday with India on energy co-operation, excluding nuclear, and also inched closer to a free-trade arrangement by agreeing to set up a study group "to explore the parameters" of such an agreement.

The prime minister wraps up his three-day Indian visit on Wednedsay with visits to the BAPS Swaminarayan Akshardham, a massive new Hindu temple in New Delhi, and to the famed Golden Temple in the Sikh heartland of Amritsat.