By Marcelo Teixeira
SAO PAULO (Reuters) - Brazil and India are expected to sign a memorandum of understanding on production and trade of ethanol when leaders of the two countries meet in Brasilia later this year, an industry group said on Tuesday.
According to UDOP, a Brazilian association of sugar and ethanol producers, the suggestion to discuss a partnership on ethanol came from the Indian government, which has a target to gradually increase blending of ethanol to gasoline to up to 20%.
Indian Prime Minister Narendra Modi was reelected in May and will make an official visit to Brazilian President Jair Bolsonaro in November.
Bolsonaro posted messages on Twitter congratulating Modi and expressing intentions to boost ties with India, particularly in trade. Modi and Bolsonaro later met during the G20 summit in Osaka, Japan at the end of June.
UDOP said, citing information from the energy department in Brazil's foreign relations ministry, that Bolsonaro's government plans to help India to boost ethanol production and open the Indian market for the biofuel, helping to expand global use of ethanol.
Brazil is the second largest ethanol maker after the United States. Large-scale use of ethanol takes place only in those two countries, basically, despite efforts in the past to make ethanol an internationally traded commodity.
Despite the positive tone for November's meeting, Brazil is fighting India in the World Trade Organization because of sugar export subsidies.
India has surpassed Brazil as the world's largest sugar producer as it gives financial help to cane producers and sugar mills, a stimulus that is hampering a potential price recovery in the depressed global sugar market.
India has been providing transport subsidies of between 1,000 rupees ($14.59) a tonne to 3,000 rupees a tonne to sugar mills, depending on the distance to ports. The government has also raised the amount it directly pays to cane growers to 138 rupees a tonne in assistance from 55 rupees a year ago.
India has no intention of halting the subsidies, Reuters reported on Monday.
But using more cane in India to produce ethanol, instead of sugar, could reduce the global supply of the sweetener, as Brazil has been doing for the last two seasons with cane allocation to sugar production hitting a record low of 35% in 2018-19.
(Reporting by Marcelo Teixeira; editing by Grant McCool)