Canada is on an 18-race calendar for next year

The race was listed on F1's provisional calendar for 2004 on the condition that it made up the shortfall due to a local ban on cigarette advertising.

And race organisers - supported by the Canadian government - have now agreed a plan with F1 supremo Bernie Ecclestone to compensate teams unable to run tobacco advertising in the race.

The federal and Quebec governments will each contribute �2.7m and the Labatt brewery will give �2.3m to sponsor the event, according to race promoter Normand Legault.

"We are happy to have reached such a conclusion when, in August, we estimated our chances to have Formula One with us again to be rather slim," said Legault.

We eagerly await this event, which is among the most treasured in the championship F1 chief Bernie Ecclestone

"For the Canadian Grand Prix team, the bulk of work now remains to be done - to prepare and sell the event and to ensure in large part the compensation payment to the teams."

The Montreal race was originally scrapped in August because of a tobacco advertising ban that came into effect on 1 October.

Austria was wiped off the 2004 calendar for a similar reason while this year's Belgian race was also axed.

New races added to F1 calendar

But the Canadian GP was pencilled in for 13 June when the FIA announced its revised 18-race schedule last month.

"We eagerly await this event, which is among the most treasured in the championship," Ecclestone said in a statement on Tuesday.

Canada has had a Grand Prix since 1967 and Montreal has hosted the race at the Gilles Villeneuve circuit since 1978.

Three of F1's top four teams - Ferrari, McLaren and Renault - are heavily dependent on tobacco sponsorship.

British American Racing is part-owned by British American Tobacco, while Jordan is also backed by a cigarette brand.

Tobacco sponsorship is due to be prohibited in the European Union from mid-2005.