Indian government officials are discussing a boycott of the opening and closing ceremonies of the London 2012 Games in protest at the sponsorship of the stadium wrap by Dow Chemical.

The government has written to the International Olympic Committee asking for the sponsorship to be dropped and, according to reports in India on Wednesday, was on the verge of boycotting not only the opening and closing ceremonies but other official events related to the Games.

The IOC, which has its own $100m sponsorship deal with the chemical giant, had already refused an earlier appeal from the Indian Olympic Association.

Campaigners believe Dow has ongoing liabilities relating to the 1984 Bhopal disaster through its ownership of Union Carbide, the company that owned the plant at the time of the disaster.

"We cherish and celebrate the noble ideals of the Olympic movement. India stands firmly committed to these ideals and the values they promote of friendship, unity, brotherhood and compassion," the letter from the Indian sports ministry stated.

"We strongly believe that there is no better medium than sports to inculcate and foster the feeling of friendship and solidarity among the people of the world. This being so we are dismayed that the IOC has not respected the sentiments of a large group of stakeholders including Olympians and withdrawn its association with Dow Chemicals," said the letter signed by Rahul Bhatnagar, the joint secretary in the ministry.

Campaigners believe that all government officials will boycott the ceremonies and are hopeful that Indian athletes may follow suit. The IOA is expected to meet on Friday to consider its next move.

A boycott by officials would be a distraction for organisers, but would also be a blow to the British government at a time when it is hoping to use the Games to boost inward investment and build trade links with key partners including India. The absence of athletes from the ceremonies would also raise the potential for the issue to become a major embarrassment.

The controversy over the stadium wrap has rumbled since last year when Dow was named as sponsor following the withdrawal of public funding for the £7m project.

It has escalated in the wake of a concerted campaign by MPs and was thrust back into the limelight following the resignation of Meredith Alexander, one of 12 commissioners on the watchdog charged with overseeing the sustainability of the London Games.

Both the IOC and London Olympic organisers have defended their relationships with Dow, arguing that it didn't own the plant at the time of the disaster and has since settled all outstanding liabilities.

The sports minister, Hugh Robertson, also defended the deal this week. "The time for a protest, if any protest needed to be had, was the moment that the IOC signed up Dow in the first place," he said.

Dow has said previously: "Dow never owned or operated the facility in Bhopal. Dow acquired the shares of Union Carbide Corporation more than 16 years after the tragedy, and 10 years after the $470m settlement agreement – paid by Union Carbide Corporation and Union Carbide India, Limited – was approved by the Indian supreme court. The settlement agreement has been reviewed twice and again upheld by the Supreme Court of India in 1991 and 2007."