The government said it would fund a clean up of the still-polluted site of the catastrophe, increase compensation for victims, improve medical facilities and try to extract more compensation from the culprit, Union Carbide.

The new response more than 25 years after the world's worst industrial accident comes amid public anger over the handling of the disaster by former governments, with pollution and health problems still rife in Bhopal.

The recent convictions of seven local Union Carbide managers cast a spotlight on the central Indian city again and stirred resentment that the former CEO of the parent group, Warren Anderson, has never faced charges.

He is retired and living in an affluent part of New York state.

Despite previous demands being turned down, Information Minister Ambika Soni told reporters that India would assemble new evidence against Anderson and "thereafter press the request for extradition with the US government".

A pesticide plant 51-percent owned by Union Carbide spewed 40 tonnes of toxic gas into residential areas of Bhopal in Madhya Pradesh state in December 1984. The gas killed thousands instantly and tens of thousands more from its lingering effects over the following years.

New federal funds are to be set aside to double the compensation for the families of the dead to one million rupees (22,000 dollars), as well as increase payments for those with health defects.

"More than 45,000 victims who were affected most severely by the tragedy will receive additional ex gratia payments," said Soni.

Federal funds will also be used to upgrade local hospitals and set up a research centre in Bhopal, while the still-toxic site of the factory will finally be cleaned up and dismantled by the end of 2012

The total package is worth a maximum 1.28 billion rupees (276 million dollars).

In a move certain to provoke a legal struggle with Union Carbide and its new owner Dow Chemical, Soni said the government would explore the possibility of extracting more compensation on a "polluter pays" basis.

Union Carbide struck a 470-million-dollar out-of-court settlement with the Indian government in 1989, which absolved it of further responsibility for the medical costs or clean-up of the site.

Dow Chemical has rejected any further liability, saying the settlement was final and that Union Carbide has sold its Indian unit by the time it competed its acquisition in 1999.

In a further challenge to past judgements, the government said it would also petition the Supreme Court to reconsider charges against the Union Carbide bosses, which were reduced to criminal negligence with a maximum sentence of two years in prison.

"We demand the government of India to take strong action against Dow Chemicals," said Satinath Sarangi from the Bhopal Group for Information and Action (BGIA), an umbrella group for survivors.

BGIA had rejected the fresh action plan which was widely leaked to the press before being made public. The steps were all recommended on Monday by a panel of ministers set up to review the case.

"The government has failed to understand the scale of damage," said Sarangi.

"There is no mention of the second and third generation victims and the constant medical complications being caused by the contamination," he added.

Attempts to extradite Anderson and extract more compensation from Union Carbide are likely to play well with the Indian public and media, which view them as having gotten away lightly given the scale of the catastrophe.

Commentators have increasingly sought to contrast the tough US response to the oil disaster in the Gulf of Mexico caused by British group BP and the Bhopal accident 25 years ago.

India and United States have an extradition treaty but Washington has turned down several previous requests for Anderson.

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