Six people were believed to be still trapped inside the building in Sular Gharat, they said.
The reason behind the fire, which triggered the blast, was not immediately known.
"Because of the blast in the godown, the roof of the building collapsed and some people might be trapped under the debris," said DSP, (Dirba), Yogesh Kumar.
Deputy Commissioner Amar Partap Singh Virk said four people died and three others were injured in the blast.
The injured have been admitted to the Patiala hospital and one of them is stated to be critical.
Sangrur SSP Mandeep Singh told PTI over phone that fire fighters had reached the spot and were trying to douse the fire.
Punjab Chief Minister Capt Amarinder Singh has directed Virk to ensure the injured were not charged at hospitals and adequate arrangements were in place to evacuate people from the building, an official spokesperson said.
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