Every year, thousands of villagers in Nepal and Tibet harvest the parasitic fungus Cordyceps sinensis, known locally as yarchagumba, which grows on the body of a caterpillar.
It can fetch huge sums in neighbouring China where it is used in herbal medicines, but is only found at certain elevations and for a few weeks a year.
Officials in the western district of Mugu where the clash occurred said they had dispatched a police team on Wednesday after receiving reports of the clash, but they only arrived on today morning.
"Locals said the gang had stolen their collections."
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It is not the first time that violence has broken out over the yarchagumba harvest -- in 2009 seven people were brutally murdered in a fight over harvesting rights. Two years after, the court convicted 19 villagers over the case.
Sharma said no medical teams had yet reached the spot. A rescue helicopter took off, but had been forced to turn back because of bad weather.
No definitive research has been published on the beneficial qualities of the fungus, but Chinese herbalists believe it boosts sexual performance.
Boiled in water to make tea, or added to soups and stews, it is said to cure a variety of ailments from fatigue to cancer.
In recent years researchers have said supplies are declining, perhaps due to over-harvesting.