Women and small children were among those who participated in the protest which was started by opposition leader, V S Achuthanandan.
The organisers said the Kerala Human Rights Commission had five years ago ordered the government to disburse the compensation.
However, a statement from Chief Minister Oommen Chandy's office stated that the UDF government had disbursed Rs 150.71 crore to the victims.
As per the recommendations of the National Human Rights Commission, the UDF government had sanctioned Rs 104.40 crore and Rs 46.31 crore for disbursing monthly pension and other benefits.