The battle between police and Sheung Shui villagers erupted yesterday at the end of about a year of negotiations over relocation and compensation. The flare-up came when bulldozers tried to move in to clear the Shek Wu San Tsuen squatter area. Nine families and eight small business operators had refused to leave. Talks had been going on with the Housing Department since December 23, when the Government gazetted a land resumption order to pave the way for work on the River Indus, a subsidiary of the Ng Tung River. The village has been a squatter area for years, with homes and businesses built on government land for furniture-making and farming. There are only four small lots of private arable land in the village. The Lands Department said the owners had accepted compensation at $138 per square foot of land. The village has 121 families, or 310 residents. Eighty-eight families had either accepted a move to public rental housing in Fanling or Sheung Shui or interim housing in Yuen Long. But by the deadline on September 29, some residents rejected the resettlement offer and others were not entitled to compensation because they were occupying government land or did not have operating licences. Acting chairman of the Heung Yee Kuk Daniel Lam Wai-keung expressed regret about the incident but urged villagers to stay calm. 'There are many cases of unfair compensation to villagers on land resumption and their emotion is understandable,' he said. 'But as Hong Kong is a society governed by the rule of law, the villagers should adopt lawful means to solve the problem.' Mr Lam said the kuk would follow up the issue, although the village was not an indigenous village and no village representative had been elected. Shek Wu San Tsuen lies at a strategic point in the upper course of the River Indus, which has often flooded the northern New Territories. The river leads into the Shenzhen River, which is being widened and diverted to alleviate flooding. The Territorial Development Department sought $587 million from the legislature for the upper River Indus project in April. The project was to start in August and be finished by March 2002. Department project engineer Wong Fu-wah said the project was crucial for flood control. The delay could prolong the flooding threat for at least one more rainy season. 'If there is delay it would not be just days but a whole rainy season as the construction project cannot be carried on in the rainy season when river flow is high,' he said.