Nearby houses were evacuated and the Nepean Highway through the town was closed to traffic for five hours.
Other residents were warned to stay inside and open doors and windows to reduce the risk of glass shattering during the controlled blasts which sent sand and debris 25 metres in the air.
Experts from the Department of Labor and Industry and police lined up the containers of gelignite along the beach and detonated them at intervals of between 10 and 15 minutes.
Police said the gelignite, which was “sweating”, had been buried in the sand for about two years. Locals said the site was in an area popular with beachgoers.
According to a Yarra Valley quarry operator, a blast of 10 kilograms of explosives could lift 2000 tonnes of material, depending how it was buried. Had it exploded, he said, it would have blown apart the boatsheds.
And he said that the gelignite could have exploded spontaneously if it had become wet enough.
The gelignite was discovered after police raided a house in Graham Street, Dromana, yesterday morning.
During the raid, they said, they found electric detonators in glass jars throughout the house and in the yard.
They interviewed several people at the house and later spoke to a man in a car at Reservoir. The man was taken back to Dromana to help police in their investigations.
Police later called in Department of Labor explosives experts and a sniffer dog. They went to Dromana beach where they found five plastic containers of gelignite in various locations.
Last night, a Dromana man, Glenn Michael Daly, 31, was charged with one count of burglary, one count of theft, and one of possessing explosives.
He was remanded by Mr Collins, JP, to appear In Frankton Magistrate’s Court on 5 January.