Administrator Vinay Chand said several people fainted on the road and were rushed to hospital in Vishakhapatnam, a city in Andhra Pradesh state. The dead included an 8-year-old girl.
The synthetic chemical styrene leaked from the plant of LG Polymers company, Chand said.
Nearly 1,000 people felt sick in an area of 3 kilometres (1.8 miles) complaining of breathing difficulties and burning sensation in their eyes, he said.
Authorities deployed 25 ambulances to shift the sick to hospitals and others away from the accident site.
An eyewitness said there was a total panic as a mist like gas enveloped the area. "People felt breathless in their homes and tried to run away. Darkness added to the confusion,” he said.
Television images showed several people lying on a street as they collapsed while trying to flee the area.
Srijana Gummala, the local municipal commissioner, said water is being sprayed in the area to minimize the impact of the gas. “Through public address system, the people are being asked to use wet masks,” he said.
Chand said the gas leaked after a fire broke out at the plant where workers were preparing to restart the plant after a closure due to a lockdown in India imposed on March 25 to control the spread of coronavirus pandemic.
The government recently announced easing of the lockdown, allowing neighborhood shops and manufacturing units to reopen to resume economic activity.
India has so far reported nearly 50,000 virus cases with 14,183 recovered and 1,694 deaths.