A $2.4 million government compensation payout for closure of a remote indigenous community pub will be the first of many, Mornington Shire's CEO believes.

The 1100-strong Mornington Island community, in the Gulf of Carpentaria, was forced to shut its Lelka Murrin pub in January after a slew of licensing violations.

The State Government's tough new grog laws, aimed at driving down drinking in indigenous communities, mean the canteen’s doors will remain closed.

And it was announced last week, the Government would pay the Mornington Shire Council $2.4 million, in instalments of $600,000 over four years, to compensate for lost revenue.

The sum is about 50 per cent of the revenue that would have poured from the tavern into council coffers, subsidising aerodrome, aged care and barge services, Mornington Shire CEO Chris Francis told The Cairns Post.

But Mr Francis said many indigenous communities would be in the same situation when their canteens closed by year's end.

"Every community that had a canteen, each will be required to surrender its licence by the end of the year," he said.

"If the council is losing revenue, the Government will have to provide compensation."

Mornington council was considering converting the pub into a motel, in a bid to make up the revenue shortfall, he said.

Island Mayor Cecil Goodman was unimpressed by news of the payout.

"I don't know what we're going to do with all that blooming money," Cr Goodman told The Cairns Post.

An avowed teetotaller, Cr Goodman nonetheless slammed the State Government and called for liquor licensing laws restricting grog sales to be revoked. "They'll get beer from Burketown, or somewhere else, come back and make it bad for the people who stay on the island," he said.

"No matter what the Government does, they'll get grog."

Locals and visitors are still able to get a drink at the island's Birri Fishing Lodge restaurant, as long as the liquor is consumed with a meal.

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