Denmark is to offer more than $3bn in compensation to mink farmers following a controversial decision last year to eradicate the country’s stock of the creatures in an effort to curb the Covid-19 pandemic.

Danish MPs agreed late on Monday night to give mink farmers up to DKr19bn ($3.1bn) to recoup losses for the up to 17m animals culled and the future loss of earnings in a deal judged by many to be generous to an industry already in decline.

Denmark was the world’s largest producer of mink pelts but the centre-left government abruptly put an end to the industry in November amid fears that a mutant strain of coronavirus that had passed back from mink to humans could threaten the efficacy of some vaccines.

But the cull descended into a political, logistical and scientific farce as it transpired that the government had no legal basis to order the killing, and authorities were forced to exhume the mass graves after swollen mink corpses came to the surface and threatened drinking water supplies.

Scientists also cast doubt on whether the mutated version of coronavirus was as dangerous as Danish officials initially claimed and the threat it posed to vaccines. Denmark’s agriculture minister was forced to resign over the scandal.

The Danish mink industry had already been facing tough times before the pandemic as many western consumers balked at wearing animal furs. Several European countries have banned mink farming, leaving China and Russia as popular destinations for the pelts.

Denmark has banned mink farming for this year amid fears that the creatures could act as reservoirs for the virus to pass between them and humans, but the government is open to re-establishing the industry in 2022.

Farmers are set to receive compensation at the current market rate of DKr160-250 for the animals killed during the cull, but DKr333 per animal to calculate the theoretical loss of future earnings.

An average Danish mink farmer with 2,670 creatures would receive about DKr2.7m-DKr4.1m for the dead animals and about DKr7.6m for loss of future earnings as well as DKr1.3m for capital costs such as buildings and equipment, according to the government.

“We have handed over a world-class business, so of course we must have proper compensation,” Tage Pedersen, head of the Danish mink breeders’ association, told TV2. He added that the industry would “never come back” as the competition from countries such as China and Poland was too fierce to start up production again.

The deal was backed by the governing Social Democrats and four other parties, but two leftwing parties refused to support it, arguing the payouts were too generous.