A D.C. City Council hearing erupted in sharp debates over ethnic and racial discrimination Thursday as several black contractors and a former City Council member attacked a proposal to include Asian-Americans and Hispanics of European descent in the city's $125 million-a-year minority contracting program.

Former council member Willie J. Hardy, who in 1980 helped lead the effort that eliminated those groups from the program that sets aside 25 percent of the city's contracts for recognized minority groups, said that many black businesses already are failing and getting inadequate assistance from the city.

Adding more minorities to the program would "only further economically deprive the group of minorities for which the bill was originally intended to help," said Hardy, who until 1980 represented Ward 7 in far Northeast and Southeast Washington. "We are talking about only a small pot of money."

Cardell Shelton, president of Southeast General Construction and Maintenance Corp., said, "We are dealing with black economic genocide, the survival of our black community. We blacks are still at the bottom of the line, not because of our own ability, but because we are black."

Such opposition to changing the law, which now applies primarily to blacks, Native Americans and Hispanics from Central America, South America and the Caribbean, drew a sharp retort from council member John A. Wilson (D-Ward 2), the sponsor of the provision to include Asian-Americans.

"I think it is awfully dangerous that we as a people would pick up the same traits of our oppressors," said Wilson, a black former civil rights activist who recounted the history of discrimination against blacks and ethnic groups in America.

Shelton drew gasps from the audience when he lashed out at Wilson, accusing the majority-black city government of insensitivity to the problems of blacks, who make up 70 percent of the city's population

"Your blackness has to be questioned," Shelton told Wilson, a one-time member of the Student Nonviolent Coordinating Committee. "What part have you played in helping us?"

Council member Charlene Drew Jarvis (D-Ward 4), chairman of the committee on housing and economic development, which held the hearing, quickly admonished Shelton. "I will not tolerate an address like that," said Jarvis, who is black.

Wilson, who often has been sharp-tongued, tried to turn aside the remark quietly, but Shelton interrupted. "We have some blacks that are black in color but white of mind. We have some blacks who are not sensitive to our blackness," Shelton said.

Wilson responded, "Until every minority is given an opportunity, all minorities . . . are discriminated against . . . . I don't care what you think of me as a person."

Several black business owners who opposed the changes contended that Asians have easier access to banks for business capital and thus less need to participate in the program.

And some speakers complained that the minority program already is underfunded and understaffed and slow to process payments for cash-strapped businesses. There also were complaints that too few of the sheltered contracts now go to blacks.

Asian and Hispanic speakers countered that their groups had also suffered discrimination in this country.

"We feel it is unfair for the law to exclude the Oriental minority," said Fred Liu, a restaurant owner representing two organizations of Chinese businesses in Washington.

William C. Jameson, executive director of the Minority Business Opportunity Commission, which administers the law, testified for Mayor Marion Barry in favor of the expanded definition of minorities.

Milton Carey, president of the Associated Minority Contractors of America, warned that "there has developed a division among and between minority groups in our community that is not healthy."

Carey, speaking in favor of the bills, argued that minority groups, which he said make up 27 percent of the nation's population, should band together.

"Our basic rights as minorities are being bombarded from all branches of government," he said.

The Minority Contracting Act, passed in 1976, sets aside 25 percent of all city business for minority firms certified by the Minority Business Opportunity Commission.

In 1980, Hispanics of European descent were excluded after complaints that wealthy Europeans from Spain and Portugal were were obtaining major contracts through the program.