Officials said that out of the 70 victims, 20 would be given Rs 300,000 each, while others would be paid Rs 20,000.
The compensation amount was released on the government's recommendations of the Andhra Pradesh National Minorities Commission, which also asked the government that it consider deducting amount from the salaries of erring police officials.
The recommendations had been made over a year ago, but the government failed to act on the same.
A letter was also written by Wajahat Habibullah, Chairman, National Minorities Commission in Aug asking him to act on the recommendations, that also included legal action against those police officials involved in the torture and arrest of the youths, issuing good character certificates and providing them employment commensurate in accordance with their qualifications to all those acquitted in the case.
Majlis-e-Ittehadul Muslimeen (MIM) and other Muslim groups have been demanding that the government pay compensation to those who were arrested.
A bomb exploded in Mecca Masjid on May 18, 2007 during Friday prayers in the mosque, which claimed nine lives. Five people were killed in police firing later during the clashes.