Groundwater found near the site of the world's worst chemical industrial accident in Bhopal is still toxic and poisoning residents a quarter of a century after a gas leak there killed thousands, two studies have revealed.

Delhi's Centre for Science and the Environment said that water found two miles from the factory contained pesticides at levels 40 times higher than the Indian safety standard.

In a second study, the UK-based Bhopal Medical Appeal (BMA) found a chemical cocktail in the local drinking water – with one carcinogen, carbon tetrafluoride, present at 2,400 times the World Health Organisation's guidelines.

Around 5,000 people were killed when clouds of toxic gas escaped from Union Carbide's pesticide plant at midnight on 3 December 1984. 15,000 more died in the following weeks, and activists say that the disaster is still poisoning a new generation of victims.

The Sambhavna clinic, a charity campaigning in Bhopal, has conducted a survey of 20,000 people and says it has found alarmingly high rates of birth defects. A preliminary study suggests as many as one child in 25 is born with a congenital defect.

"We are seeing birth defects at 10 times the incidence at national levels," said Satinath Sarangi, of the Sambhavna clinic.

"The government have been trying to say that the factory is safe and open for the public to tour it. But these results show how polluted the site has become."

Earlier studies have also pointed out that boys who were either exposed as toddlers to gases from the Bhopal pesticide plant or born to exposed parents were prone to "growth retardation".

Survivors in Bhopal have received meagre compensation: most of them got a Rs 25,000 cheque (£310) for a lifetime of suffering caused by damage to their lungs, liver, kidneys and the immune system.

Mohini Devi, 52, spent three months in hospital after inhaling the gas. For 25 years she has had difficulty breathing and suffered shooting pain through her abdomen. Her children have all been affected – one died from "gas complications" 15 years ago.

"My real worry is my grandchildren. Already some have been born without eyes. Why is nobody doing anything for us?" she said.

In Bhopal the legacy of the city's night of death is there for all to see. The disused Union Carbide factory remains a rusty symbol of bureaucratic indifference, legal actions and rows over corporate responsibility. Not only did the government wind up research into the after effects of the poison gas in 1994, it failed to gather evidence of culpability in the case against the US company.

Campaigners say the site now contains about 8,000 tonnes of carcinogenic chemicals that continue to leach out and contaminate water supplies used by 30,000 local people. Union Carbide says it is no longer responsible for the factory and pointed out it has already made a settlement of $470m (£284m).

The company's chief executive at the time, Warren Anderson, was briefly arrested after the leak 25 years ago but was released and fled India. He has been declared "untraceable" by Indian consular authorities although his address in a New York suburb is publicly listed.

The Indian government has also drawn fire for trying to pass the disused factory off as a tourist spot – with local politicians last month proposing to build a Hiroshima-like memorial there depicting a detailed account of the disaster. Adding insult to injury, India's environment minister, Jairam Ramesh mocked activists on a visit to the city by picking up a fistful of waste and saying "see, I am alive".

Sarangi says the government has been trying to tempt Union Carbide's successor, Dow Chemical, back to India and to secure $1bn of investment.

In return, say campaigners, the government plans to let Dow evade its responsibility to clean up the Bhopal plant site. "This is all about the money. Politicians in India would rather do this than fight for people who suffered," Sarangi said.