Y Byd was to have launched on St David's Day

The company behind Y Byd (The World) said a £200,000 annual grant for the next three years was "insufficient".

Dyddiol Cyf also criticised the assembly government for not meeting a commitment to expand its funding and support for Welsh-language press.

In response, the assembly government said more than £1m will be invested in the sector over the next three years.

Ned Thomas, chair of Dyddiol Cyf, said they were "firmly of the opinion" the assembly government was not fulfilling a pledge in the coalition One Wales document to back moves to expand the Welsh-language sector, and set up a daily paper in the language.

The company had warned the venture was in jeopardy without a speedy decision on public support before a review concluded a daily Welsh newspaper's viability had not been proven.

Progressive bids

Last week, Welsh language minister Rhodri Glyn Thomas announced an extra subsidy of £200,000 a year for the next three years for the Welsh language media sector.

Following the decision to scrap Y Byd, an assembly government spokesperson said: "Rhodri Glyn Thomas's swift response to Dr Bianchi's report was a clear demonstration of Welsh Assembly Government support for the Welsh-language printed press".

"More than £1m will be invested in the Welsh-language press over the next three years, including the additional £600,000 announced by the heritage minister".

"We are confident that the additional money will lead to progressive bids which will increase the numbers of people who read in Welsh, and especially young people," the spokesperson added.

Y Byd was first unveiled last June when the company said it would print the first copy this St David's Day.

Rhodri Glyn Thomas announced extra aid for the sector last week

Five thousand subscribers were being sought for the publication, which was to cover Welsh, UK and international news.

With headquarters in Machynlleth, the paper was to employ 24 people and also receive grant aid from Powys council.

However, in November the company announced that it was reviewing the timetable for the launch.

It said the move was prompted by the wider review of the Welsh-language press by the minister and the Welsh Language Board.

Positive ideas

The report's author, Tony Bianchi, concluded there was evidence of interest but none that enough people would buy Y Byd to make it viable.

Dr Bianchi said the venture would need a grant in its first year of at least £600,000, and the promise of advertising revenue from the assembly government to have any chance of success.

Dyddiol Cyf said it was now "considering a number of other positive ideas which could give a much needed boost to the Welsh press".