When people in Mexico's western state of Michoacán started fighting back against the unbridled violence, systematic economic exploitation, and shattered self respect that came with living under the de facto dictatorship of one of Mexico's most vicious and bizarre criminal gangs, many in Mexico applauded, or at least expressed sympathy.

Today the Knights Templar cartel that once dominated the region is a shadow of its former self, but concern is growing that the heavily armed militias who helped break the cartel's dominance could themselves trigger more violence and prove as difficult to control.

"The basic problem with the self-defence groups is that the government cannot disarm them without handing control back to the Knights Templars, but it can't tolerate them either," says Alejandro Hope, a leading expert on Mexico's drug wars.

Hope argues for a clear legal framework to gradually institutionalise some of the vigilantes while rendering them irrelevant through strengthening the local-level security apparatus. Instead, he says, the government is "winging it".

The government did little about the vigilante phenomenon in the Tierra Caliente region in the western state of Michoacán until this year when the militias began advancing on key cartel strongholds that had taken root amid the near total collusion and collapse of local institutions.

From mid January, the army, navy and federal police have flooded the region, but the original objective of disarming the vigilantes was soon discarded in the face of their insistence that without weapons they would be killed by the cartel.

Instead the government worked with the vigilantes to go after the Templars. Today the cartel's two remaining important leaders are reportedly hiding in mountain caves above the region's valleys, which burst with the limes, mangos and avocados on which the cartel once levied systematic taxes.

But the vigilante movement has also proved far more complex and potentially dangerous than the uprising of desperate citizens fed up with criminal oppression it claims to be.

Already there are reports of vigilantes demanding quotas, and long-standing rumours of links to rival cartels persist. The vigilantes deny such parallels with organised crime, but are struggling to brush aside their internal conflicts linked to personal animosities or such issues as the inclusion of former cartel members – the so-called "perdonados", or forgiven.

Last week a faction led by Luis Torres, nicknamed Simón El Americano, gathered at the gates of the ranch owned by another leader called Hipólito Mora, accusing him of involvement in the murder of two of El Americano's men. Mora fled in a federal helicopter but was soon arrested and indicted.

Since then local media has published leaked allegations of criminality in Mexico and the US involving other leaders, prompting concern among some that they could be arrested too.

José Manuel Mireles told the magazine Proceso he felt betrayed by government officials who had previously treated leaders like him as allies. Mireles, who was imprisoned in the 1980s on drug-trafficking charges he claims were trumped up by Mexican police intent on collecting a bonus from US authorities, warned of defiance. "Nobody messes with Michoacán, not even the bloody government," he said. "If the government wants a war, it will have a war."

Others have chosen to remain close to the government, stressing the achievements of their co-ordinated actions against the Caballeros and the relative calm of the region today.

"We have no problem with the government," Estanislao Beltrán, who goes by the nickname Papa Pitufo, or Papa Smurf, said, stressing the dramatic drop in extortion, kidnapping and murders. "Co-ordinating with the government, we are 80% on the way to cleaning organised crime out of Michoacán completely."

But even Beltrán admits that the 15,000 to 20,000 vigilantes have registered only 1,400 of their weapons with the authorities as part of an agreement reached last month that was supposed to initiate their transformation into rural police.

Some experts worry that the government's unpredictable treatment of the vigilantes will encourage leaders to fortify their positions in their communities, with the risk of conflicts between them over territory rising, and influence expanding as a result.

"The federal offensive in the context of the impotence and weakness of the state was healthy, but I don't see the institutionalisation that could make it sustainable," says Edgardo Buscaglia, an expert on organised crime. "At the moment the federal forces are a referee, but what happens when they go?"