Plans for the first-ever Welsh language daily newspaper have been abandoned.

It was hoped the publishers Dyddiol Cyf would launch Y Byd (The World) on St David's Day next month.

But after the recent funding announcement by the Welsh Assembly fell short of what the company hoped for, the decision was taken to pull the plug on the project.

The Assembly said that a grant of £600,000 over the next three years was available but Dyddiol Cyf were hoping for up to a £1m just to get the paper up and running.

Further doubts were thrown over the project when Dr Toni Bianchi questioned the viability and sustainability of a daily Welsh-language paper.

A statement by Ned Thomas, Dyddiol Cyf's chairman, said: "In light of the Assembly Government's recent statement on the funding of the Welsh press, it will not be possible for Dyddiol Cyf to establish a Welsh-language daily newspaper.

"Even though Dyddiol Cyf has not so far presented its full business plan to the Assembly Government, it was absolutely clear to the Government that an annual grant of as little as £200,000 would be insufficient to establish a Welsh-language daily newspaper - Dyddiol Cyf had said as much, as had Dr Tony Bianchi in his report.

"We are firmly of the opinion, therefore, that the Minister for Heritage's decision does not fulfil the Assembly Government's commitment, as written in its One Wales document.

"The board of Dyddiol Cyf is considering a number of other positive ideas which could give a much-needed boost to the Welsh press.

"We will be asking the company's shareholders to consider these options.

"Following the Minister's announcement, Y Byd's Editor, Aled Price, has tendered his resignation. We would like to thank him very much for his work, and his dedication to the establishment of a Welsh-language daily newspaper."