At least 85 people were killed when a cooking gas cylinder blew up in a crowded restaurant in central India on Saturday, triggering a second blast of mining detonators stored illegally nearby, police said.

The explosions tore through the restaurant as labourers sat down for breakfast during the morning rush hour in the town of Petlawad, about 800 km (500 miles) south of New Delhi, Inspector Mewa Lal Gaur told Reuters.

Gaur said people who had gathered outside the restaurant after the initial blast were caught in a second explosion when gelatin sticks stored in a nearby building caught light, blew up and buried scores of people as the roof caved in.

"When the first blast took place in the gas cylinder many people collected there to watch and see what had happened. Then there was a secondary blast," Gaur said, adding the explosion was so powerful it damaged adjacent buildings and ripped out nearby windows.

Bodies lay amid the rubble of the collapsed restaurant, which was located next to a busy junction, and twisted motorcycles and debris were strewn outside, as a crowd of onlookers searched for survivors.

Police said the death toll had risen throughout the day as rescue workers continued to pull bodies from under the rubble, but that they had now recovered all the dead and injured from the scene.

Arun Sharma, a local medical officer, said 87 people had been killed. Around 100 people were also injured in the blast, and 15 of them were in a serious condition, he said.

The accident is one the deadliest to hit India in recent years.

"This is a tragic incident, which has shook me. The causes of the incident will be investigated," Madhya Pradesh's chief minister Shivraj Singh Chouhan told local television channels.

Chouhan has announced 200,000 rupees ($3,000) in compensation for the families of those killed and 50,000 for those injured, media reported.

Gaur said the detonators, which are used for construction activity, mining and digging wells, should not have been kept in the room near to the restaurant and it was illegal to do so even if the owner was given a licence.

The district surrounding Petlawad is home to a number of manganese and bauxite mines. – Reuters