Police said there were no casualties.
The flames were immediately brought under control and no one was injured in the fire at the venue of the five-day 'Ayutha Chandi Maha Yagam' being performed by Rao at his farm house near here, police said.
The incident occurred at around 1.30 pm at Erravelli village in neighbouring Medak district when fire, that erupted from the 'homagundam' (pedestal for sacred fire), spread to the 'Yagashala' shed (made of grass), they said.
"No one was injured in the incident and all the people present there were immediately evacuated. The flames have been brought under control," the DSP said.
President Pranab Mukherjee, who was expected to attend the ritual on the final day of the event, "cancelled" his visit reportedly following the incident, the DSP said.
The 'yagam', "being performed for universal good and peace", started on December 23.