The Home Ministry has decided to give the families of each of the eight victims, including three minors, Rs 3 lakh from its discretionary fund, Rs 3 lakh from the fund of victims of terrorist violence and Rs one lakh from the Security Related Expenditure, official sources said.
Rs 2 lakh will also be given as compensation to each of the victims' families by the Chhattisgarh government.
The CRPF, which was involved in the gunfight, has already ordered an inquiry into the Bijapur (Chhattisgarh) incidents after allegations that the encounter was fake and aimed at targeting innocent villagers.
The eight villagers and a CoBRA commando were killed in the gunfight between security forces and the ultras near Edasmeta village in southern Chhattisgarh on the intervening night of May 17-18.
CRPF had already put in place additional precautionary measures after the Sarkeguda encounter last year but the allegations of this being a fake encountered have come to the fore again.