(adds minister's confirmation)

By Tim Cocks

KAMPALA, Oct 17 (Reuters) - Uganda has agreed to scrap an unpopular plan to give a swath of protected rainforest to a sugar planter, the environment minister said on Wednesday.

Maria Mutagamba told Reuters the government had finally rejected a request by the privately owned Mehta Group to destroy a third of Mabira Forest and convert it to sugarcane.

"The idea of sugar growing in Mabira is no longer there. We are looking for money for other land," she said.

Uganda's cabinet suspended the proposal by President Yoweri Museveni to give 7,100 hectares (17,540 acres) or nearly a third of Mabira Forest to Mehta's sugar estate in May, following a public outcry.

Three people died in violent protests against the plan, including an Indian stoned to death by rioters. Mehta is owned by an ethnic Indian family.

"A committee of cabinet was set up to examine the plan but did not get back to us. In the meantime, other land was identified," Mutagamba explained.

Critics said razing part of Mabira would have threatened rare species, dried up a watershed for streams that feed Lake Victoria and removed a crucial buffer against pollution of the lake from two industrial towns.

Scientists estimate some 20 percent of net global emissions of carbon dioxide, a greenhouse gas that causes climate change, are the result of deforestation, because trees suck carbon from the atmosphere.

Experts say Mabira sinks millions of tonnes of carbon.

This was the second time the government has heeded public anger over plans to trash forests -- in May, it withdrew a license to Kenyan company, Bidco, to bulldoze a protected forest on an island in Lake Victoria to plant palm oil.

A spokesman for President Museveni, Tamale Mirundi, said new land would have to be secured for the sugarcane.

Mutagamba said land had been spotted but the complex, semi-feudal system of land ownership meant the government would have to buy the land itself from small-holders.

"We want to encourage investors to do this kind of business. They can't start negotiating with 30,000 farmers."

The government is trying to draw up maps of land available to investors in Uganda for sectors like coffee, sugar, manufacturing or tourism that do not encroach on forests.

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