a better approach than storing mysql password in plain text in config file?

Since your code will need the password there is no perfect security. But you can make it hard to recover.

I put some hash in my web config, as an environment variable, say MYSQL_PASS_HASH

Then I do something like md5(getenv('MYSQL_PASS_HASH').'gibberish$qwefsdf') which is then the password. Of course you should unsetenv after that if you're paranoid.

Your password will not literally be stored somewhere, and it can be recovered only when someone has both you web config and your database include.

This happens in a file outside of the webroot (don't put all your trust in .htaccess).

Personally, I store sensitive information such as database connection details in a config.ini file outside of my web folder’s root. Then in my index.php I can do:

$config = parse_ini_file('../config.ini');

This means variables aren’t visible if your server accidentally starts outputting PHP scripts as plain text (which has happened before, infamously to Facebook); and only PHP scripts have access to the variables.

It’s also not reliant on .htaccess in which there’s no contingency if your .htaccess file is moved or destroyed.

Caveat, added 14 February 2017: I’ll now store configuration parameters like this as environment variables. I’ve not used the .ini file approach for some time now.

Keeping your config files outside of your document root is a popular way of improving the security of config files.