Police are hunting for Rajendra Kasawa in connection with Saturday's blast in Madhya Pradesh that knocked down a restaurant and neighbouring building.
Kasawa, had a licence for explosives for digging wells, construction and mining, police said.
But he had stored them illegally in a residential area, police added.
The incident took place in Petlawad in Jhabua district, where there are several manganese and bauxite mines. Many mine workers are hired on contract from the town, which is about 850km (530 miles) south of the capital, Delhi.
"We have also announced a cash award of 100,000 rupees ($1,500; Â£971)) for anyone who provides any information on the main accused, who is absconding," district police official Seema Alava told AFP news agency.
She said a police officer has since been suspended for failing to enforce the laws on storage.
Kasawa allegedly fled the area after the blast and now faces charges of criminal negligence and culpable homicide, police said.
Thirty nine people were injured in the incident, and have been admitted to hospitals.
Most of those who died were at a neighbouring restaurant, which was packed with workers and schoolchildren eating breakfast.
"We were on our way to the restaurant on Saturday morning when we heard what sounded like firecrackers. After that we heard a huge explosion, and I became unconscious. I woke up in the hospital," said 18-year-old Balram, who has been admitted to a hospital in Jhabua.
All the bodies were extracted from the debris, and black smoke from funeral pyres could be seen rising late into Saturday night.
Police in India have offered a reward to catch a shop owner who they say had illegally stored explosives that triggered a blast, killing 89 people.