Hamas officials stepped in yesterday to offer cash handouts worth a total of $52m (£38.1m) to Gazans who had lost family members, homes or businesses, as fresh evidence emerged of Israel's destruction of civilian infrastructure in Gaza, including the territory's largest concrete factory and the only operating flour mill - both of which are now in ruins.

As well as the heavy toll on human life, more than 21,000 buildings and apartments have been wholly or partly destroyed, including at least 219 major factories, among them several industrial sites, including food processing plants.

Palestinian surveyors said an initial estimate shows overall damage of $1.9bn. Israel's leaders insisted its war was against Hamas and its structures in Gaza. But much of Gaza's private industry had already been forced out of business by Israel's economic blockade over the past year and a half. The rest has now been severely damaged by war.

"They are destroying the infrastructure of the economy," said Amr Hamad, head of the Palestinian Federation of Industries. "They want us to be dependent on their economy."

The damage severely limits any hope of swift reconstruction and drives Gaza closer to complete aid dependency.

Israeli prime minister Ehud Olmert yesterday said the Israel Defence Forces had done "everything in order to avoid hitting civilians." "I do not know of any military that is more moral, fair and sensitive to civilians' lives than the IDF," he said.

One of the most striking targets was the al-Badr flour mill in Sudaniya, in northern Gaza, built in the 1920s and the largest mill in the strip.

After Israel halted imports of wheat flour into Gaza in early November, al-Badr became the last operating mill in the territory because it had a large store of wheat. Before dawn on January 10 the mill's main production lines, spread over five floors, were destroyed by an Israeli air strike - half the bomb casing remains on the first floor - and by several shells, apparently fired from tanks and Apache helicopters.

Rashad Hammada, 55, co-owns the factory with his brother. Hammada said he believed there were no Palestinian fighters in the compound. He estimated his losses were at least $3m and that, even if new machinery could be imported, it would take six months to a year to build a new production line. Palestinian merchants are now forced to import refined wheat flour from Israel at 50% higher cost. "I'm really surprised with the Israelis. They encouraged us to build, and then they destroyed it," said Hammada.

A few miles away at the Abu Eida concrete factory, east of Jabaliya, the scene was even more desolate. All four of the company's factories for ready-mix concrete and breeze blocks were reduced to rubble. The factory - the largest concrete plant in Gaza - was a partner in an important northern Gaza sewage project supported by Tony Blair, the Middle East envoy.

Now the owner, Taysir Abu Eida, is facing losses of at least $10m, which include his three-storey house nearby in Jabal Rayas that was destroyed with six neighbouring houses, where many of his relatives once lived. Although the leading factories had insurance, there is no cover for war damage.

"Such widespread destruction of civilian economic infrastructure is surely a strike at the heart of attempts to bring peace," said Chris Gunness, spokesman for the UN agency for Palestinian refugees.

Mitchell initiative

Following promises of a push for peace in the Middle East, Barack Obama's envoy to the region, George Mitchell, is due to arrive in Israel on Wednesday. Diplomats said Mitchell plans to meet leaders in Saudi Arabia, Egypt, Israel, the West Bank and Jordan, but they ruled out direct contact with Hamas. The trip is expected to last roughly a week. International envoy Tony Blair welcomed Mitchell's appointment yesterday: "I see this as a partnership between America on the one side and the international community on the other ... to make sure that we get the help to people in Gaza, then that we set about revitalising the process ... leading to (Palestinian) statehood."