There are numerous stories associated with Holi and the most popular one is that associated with Holika. But there is another story that is equally popular in many regions in
India and that is associated with
Demon Dhundha. The story also explains why fire is lit on the night of Holi.
Legend has it that during the reign of King Raghu, a demon named Dhundha terrorized the people in the kingdom. The king and his subjects tried numerous methods to curb the demonic activities of Dhundha. But nothing proved helpful.
Finally, they used magic to kill the demon. This happened on the full moon day in Phalgun Month. People collected wood, grass and household garbage and burned it on the full moon day. When the demon arrived seeing the fire, magical mantras were chanted and people used sticks and swords to drive out the demon who had lost all his powers due to the mantras.
Even today people collect heap of wood and garbage and set it afire. People go round the fire thrice and recite mantras to drive evil out.