The patients died yesterday at the Sushrut Trauma Centre in North Delhi which is a Delhi Government hospital.
Health Minister A K Walia, announcing the compensation, said punitive action will be taken against the guilty.
The government has already ordered a probe into the incident. Special Secretary in Health department S B Shashank will head the inquiry committee and it has been asked to file the report by Friday.
The deceased have been identified as Rajkumari, 35, Javed, 20 and Rehana, 36, while the fourth person, aged approximately 25 years, was yet to be identified.
Officials said malfunctioning of the oxygen supply machine has been found to be primary reasons for the incident. A private entity from Punjabi Bagh area of the city, which set up the network few months back at the hospital, was maintaining the oxygen supply facility.
Meanwhile, Walia today held a meeting with medical superintendents of all the Delhi Government hospitals and asked them to improve functioning of the hospitals.
He told them that government would come down hard against those found negligent in their duties.