The offer was made at a meeting in Toronto, which was attended by at least 40 family members of the victim's through teleconferencing.
According to a government spokesperson, many families had got the legal claims for compensation in the 1990s.
"We are just seething," said Anil Singh Hanse, whose father piloted the flight that was bombed down."This is insulting. Where the hell did they pull this figure from?"
John Major, a retired judge proposed some form of compensation to be made to the families after he probed into the Air India tragedy in Jun 2010, although no official recommendation was made.
The inquiry threw light on the fact that Canada's security agency on numerous instances missed the warning signs of terrorist attacks.
Major in his report also said that the victim's families were treated with “administrative disdain" by the Canadian government for years together.
“Now we know about all the negligence that came out in the report," said Hanse who said that he was fighting for justice and not the money.“This is absolutely disgraceful. It is one step forward, two steps back."
“This is really an insult to my husband," said Amarjit Bhinder from Singapore. “That would have been about 45 days pay for him." Bhinder's husband was a co-piolt on Air India, when tragedy struck.
The Air India flight 182 was blown up by a bomb while it was in the air. The plane crashed into the Atlantic ocean leaving at least 329 people dead. The bombings were one of the worst acts of terrorism before the Sep 11 attacks.