The incident occurred in the evening when one Sankar brought some old iron material for sale at the shop, said T Murali, deputy superintendent of police.
He said the explosion took place when the scrap dealer dumped the iron material brought by Sankar in a dustbin.
Sankar sustained injuries in the incident and was rushed to hospital, where his condition is reported to be stable.
"We suspect that some waste explosive material in small quantity could have got mixed with the scrap, causing the blast (sic)," said the DySP.
A case was registered in Kanchikacherla police station and further investigation is on.