THE Government has been accused of wasting up to $650 million by offering generous conditions to a steel company in Tseung Kwan O new town in exchange for its relocation. In a bid to remove polluting industries from residential areas, the Government reached an agreement with the Shiu Wing Steel Company (SWS) in July, paying $650 million compensation and providing a new site in Tuen Mun. Under the agreement, SWS was also given preferential rights to redevelop the original site for residential or commercial purposes. Legislators yesterday criticised the terms as too beneficial to the company. ''The Government is being too generous, leading the taxpayer to either part with more money than is necessary, or to receive less than is their due,'' United Democrats legislator Albert Chan Wai-yip said. He said the steel company would turn a huge profit by redeveloping the site into commercial and residential use. But government officials defended the decision, claiming compensation was assessed on the value of the existing plant and machinery. They also argued SWS would have to pay about $200 million for the land at the new site and be responsible for the $200 million land reclamation around the site. But Mr Chan said: ''This was a very unusual act for the Government to allow changing of an industrial site to residential and commercial land use directly.'' He also accused the Government of erring by signing an agreement to pay compensation it did not have the power to grant. ''The Government found that they didn't have the power to pay for this item with its budget soon after the contract was signed, and had to ask the Legislative Council Finance Committee for it,'' he said.