A company set up by Royal Dutch Shell, the world's largest biofuels distributor, has nixed plans to source sugar cane from Brazilian lands claimed by a local tribe, an aboriginal activist group said Wednesday.

The company Raizen was created in 2010 by Shell and Brazil ethanol behemoth Cosan to produce biofuel from sugar cane. But some of it was grown on land the Guarani tribe claims.

"Now Raizen has agreed to stop buying sugar cane from land declared as indigenous by the ministry of justice," said Survival International in a statement.

Raizen also confirmed the agreement, which commits it to stop acquiring sugar cane from Guarani lands and to consult with Brazil's Indian affairs department before making further investments in areas where there are aboriginal land claims.

"The landmark decision could set a precedent in Brazil, and will see Raizen's buying of sugar cane from land declared as indigenous 'definitely cease' by November 25," Survival International said.

Valdelice Veron's community in Mato Grosso do Sul state, where Guarani Indians claimed rivers have been polluted by pesticides used in the plantations, will be directly affected.

Survival International's director Stephen Corry said, "Raizen's decision is excellent news for the Guarani, who have been left to die on the roadside, and squeezed off their land by sugar cane production.

"Other companies must follow Raizen's example, and stop bankrolling the theft of Guarani land. It's time the world woke up to the fact that Brazil's biofuel is tainted with Indian blood."