The Government rejects accusations it is bullying iwi groups yet to complete Treaty settlements into buying shares in state-owned energy companies being opened up to privatisation.
Finance Minister Bill English and Treaty Negotiations Minister Chris Finlayson announced the move on Wednesday, saying it has the support of iwi.
But Mana Party leader Hone Harawira says it's a "bloody insult" to Maori.
He questions the timing of the announcement, with Maori groups planning court action over water rights after the Government announced it would not adopt the "shares plus" concept recommended by the Waitangi Tribunal.
Shares plus would have given iwi special shareholder privileges in companies.
Mr Harawira told Radio New Zealand the Government thought it would get a deal over water rights, and when that failed, it came up with a new deal.
"All it is is a divide and rule tactic by offering Maori a second-class deal," Mr Harawira said.
He said iwi should be "very, very careful" about taking up the deal.
"Once you accept these shares, you accept the fact that the Government has the ability to negotiate and run and control water that you are currently wanting to take to court."
Mr English rejected Mr Harawira's comments, saying they underestimate iwi.
"If they believe it's a second-class offer, they don't have to take it."
He says it would effectively see some iwi get part of their estimated settlement paid out early, and that amount would be deducted from their final settlement.
About 65 iwi whose Treaty settlements may not be completed ahead of Mighty River Power's float in the first half of next year will be eligible for the offer.
Iwi will have to pay the full share issue price and any amount drawn down will be deducted from their final settlement.
NZN