At least 20 children have died and up to 30 more are seriously ill after eating free meals at a primary school in eastern India.

The children, aged between six and 10, were fed rice and lentils at lunch at the government primary school in a small village in the poverty-stricken state of Bihar on Tuesday. The food had been cooked in the school kitchen. Staff stopped serving the meal after children began vomiting.

India's free school meals programme is one of the biggest such schemes anywhere in the world, covering more than 60 million children. Food prices have soared in recent years, leaving parents in poorer families reliant on school lunches to ensure adequate levels of nutrition. However, the scheme is plagued by waste and corruption. Incidents of poisoning are common, though rarely this serious.

Early tests showed that the food in this latest case may have been contaminated with pesticides used on rice and wheat crops in the area.

A senior government health official in Delhi said one possibility was that ingredients had been stored too close to dangerous chemicals. "Washing before cooking would have made no difference," he told the Guardian.

Parents in Masrakh, the village 50 miles (80km) north of the Bihar state capital of Patna, first took their children to the rudimentary local health centre. They were later transferred to local hospitals. Even in major metropolises India has no functioning ambulance service and in rural areas cars, rickshaws or even carts are used to carry the ill or injured.

"As soon as my son returned from school we rushed to the hospital with him. His condition was not good. He was vomiting and said his stomach was paining," one parent told Indian broadcaster CBN-IBN.

According to Abhijeet Sinha, the district magistrate, two children had died before they reached the nearest clinic with seven more dead before they could be brought to the nearest hospital.

"The doctors did their best to save the children but there was so much poison in their food that the doctors couldn't save them all," Sinha told NDTV news channel.

A school cook was reported to be in a critical condition.

Authorities suspended a food inspector and registered a case of criminal negligence against the school headmaster. The Bihar state chief minister, Nitish Kumar, has ordered an inquiry.

Kumar announced that compensation of 200,000 rupees (£2,300) would be paid to the dead children's parents.

According to the World Bank, 43% of Indian children are underweight – the highest level in the world and a figure that has remained constant for at least 20 years. In China the figure is only 7%; in sub-Saharan Africa it averages 28%. Poor nutrition among lactating and pregnant mothers means the effects of post-natal malnutrition for children are exacerbated.

The Indian prime minister, Manmohan Singh, has described infant malnutrition levels in India as a "national shame".

The government, led by the Congress party, is pushing for a massive expansion of the country's food subsidy programme with a new Right to Food Bill.