BEIJING - A COMPENSATION plan offered by Chinese companies that sold tainted milk lacks transparency and would likely be inadequate, said lawyers representing the victims, even though they have cautiously welcomed any move to help the affected families.

The Dairy Industry Association said 22 dairy producers would make a one-time cash payment to the families of at least six babies who died and some 294,000 other children who suffered kidney and urinary problems from drinking infant formula contaminated with the industrial chemical melamine, state media said over the weekend.

They will also establish a fund to cover medical bills for future health problems, although it did not disclose an amount, reported the official Xinhua news agency.

'Previously, we didn't see any hope of the families being compensated but now we do,' said Henan-based lawyer Chang Boyang, who has provided legal assistance to families of children who became ill.

Some families have already received 2,000 yuan (S$423) each, Beijing attorney Xu Zhiyong said.

Lawyers have said they heard that most children who suffered kidney stones from the tainted milk would get 2,000 yuan while seriously ill children would be paid 30,000 yuan.

But Mr Xu said the families of children who fell sick should have been consulted before payouts were awarded. 'We think this compensation is insufficient and is an injustice,' he wrote on his blog.

'This is a plan that has been imposed upon the victims and does not fundamentally solve the problem,' he added. 'There is still no justice and no responsibility.'

The compensation issue is highly sensitive.

Chinese courts have rejected all claims filed by the victims' families, including a group lawsuit filed this month by Mr Xu and five other lawyers representing 63 defendants.

The group was seeking nearly 14 million yuan in compensation from the state-owned Sanlu Group, the dairy at the centre of the scandal. Sanlu was declared bankrupt in recent days with a reported 1.1billion yuan of net debt.

The court said it could not accept the case until the government completed its investigations into the scandal.

ASSOCIATED PRESS