A fire early yesterday in which two women were killed and a town house was gutted at 1157 First Ter. NW exposed what members of the fire fighters' union contended are gaps in fire protection here caused by budget cuts.

Fire officials said Margie Estes, 49, and Robin Fagan, 23 died in the fire that began on the first floor of the modern town house and apparently shot up an open stairway through the second and third stories.

While careful to concede that it was not clear that either death could have been prevented, several fire fighters argued that valuable time had been lost before the first fire engine company responded.

Engines companies are the only fire department units that pump water and play hoses on a fire. Under a system imposed by budget restrictions, the fire department has created several joint five-member engine rescue units, that can respond to an alarm with either engine or rescue equipment, but not both.

The engine company nearest yesterday's fire is one which doubles as a rescue squad. Its five-man crew was sent from the firehouse at 1300 New Jersey Ave. NW as Rescue Squad No. 1 rather than Engine Co. No. 6. official said.

"It was just us and the truck," said the fire fighter Ed Cruz, "and we didn't have any water." Cruz climbed a ladder in the rear of the building and "we could hear somebody say 'Help me'!" he recalled. Firemen said they are not certain whether the voice was that of one the victims, or of a boy who was later rescued.

Capt. Harold Barber questioned whether the slight delay in the arrival of the first engine company - a few minutes at most - was a factor. "It wouldn't have made any difference at all in my opinion," he said. "The people that were trapped in the building, there was no way we could have rescued them."

The alarm was sent from a sidewalk box at 1.18 a.m., according to records, and the rescue squad arrived a minute later. There is no official record of when other units arrived. Barber said it was almost immediately. Some fire fighters said it may have been two, or three minutes later.

Barber, who headed the New Jeersey Avenue rescue engine unit yesterday morning noted that aluminum window casings in the rear of the house were melting as he went up a ladder. Noting that the melting point of aluminum is 1,200 degrees Fahrenheit, he concluded that the heat was enough to kill occupants of the house.

Fire fighters did rescue 9-year-old Waymond Rush, who was at the second floor rear window when they arrived and was instructed to jump. "He just happened to be in a lucky room," said Barber.

But fire fighter Raymond Gikerson, who was responded with Rescue Squad No 1, saw it differently. "If the engine company had come, they might have got that poor woman out," he said.

Two years ago, the District government imposed a system of rotating shutdowns - with four fire companies out of service at any given time - to save money. That system was attacked by union spokeman, for local 36 of the Firefighters Association and came in for widespread criticism when several fatal fires occurred within blocks of closed firehouses.

Partly as a result, the city announced a year ago that it had found an extra $1.3 million that would be used to restore full service. Union officials claim that only two units have been re-estsblished, however, while three joint engine/rescue companies - called "Mickey Mouse squads" by local 36 president David A. Ryan - have been created to give the appearance of bringing the department back to strength.

Before the budget cut, according to Ryan, there were 32 engine companies and three rescue squads. Today there are 29 engine companies, three five member engine/rescue units and one full-fledged rescue squad - in other words, said Ryan, a drop from 35 operational units to 33.

"As soon as that bell hits," said Ryan, "those five men cannot go both places (or man both kinds of vehicles) at once."

"I don't understand it and I'll never be able to understand it," said Jackie Rush, mother of Waymond Rush, the boy who was rescued but suffered severe burns to the face and hands. Also injured was William Estes, for whom no age was available.

"The whole house just blew up," Jackie Rush said. Fire officials said the cause of the blaze remains under investigation.