Firefighters were battling an enormous blaze in southeastern Australia Monday, with officials warning it could merge with another to create a "mega-fire" if weather conditions worsen.

Crews have been fighting fires that flared in high winds and searing heat across the state of New South Wales last week with more than 200 homes destroyed so far and many others damaged.

While dozens of blazes have been contained, 63 were still alight and 17 of them were out of control, enveloping Sydney in a thick white smoke haze that prompted warnings for people to stay indoors and avoid exercise.

The main concern Monday was near the town of Lithgow west of Sydney, where a huge fire -- with a perimeter of 300 kilometres (187 miles) -- has already burned more than 42,000 hectares (103,000 acres) and was threatening the communities of Bilpin, Bell, Clarence and Dargan.

Officials fear intensifying heat and winds on Tuesday and Wednesday could push it into another blaze at nearby Mount Victoria in the Blue Mountains and then move towards the populated areas of Katoomba and Leura.

"I don't think I've ever used the word mega-fire," said New South Wales Rural Fire Service Commissioner Shane Fitzsimmons.

"But the reality is that the modelling indicates that there's every likelihood that in the forecast weather conditions that these two fires, particularly up in the back end of the mountains, will merge at some point."

Firefighters spent the night and much of Monday building containment lines to try to prevent such an event, before a predicted worsening of weather conditions.

Another major fire around the Springwood area of the Blue Mountains, where almost 200 houses were razed last week, escalated to the emergency declaration level -- along with another in Wilton southwest of Sydney, which was later downgraded.

"The fire grounds remain dynamic and challenging for firefighters and are particularly susceptible to the wind and the elevated temperatures that we are experiencing," Fitzsimmons said.

But the fire chief played down earlier suggestions that all communities in the Blue Mountains, where 76,000 people live, could be evacuated.

"We are not planning a mass evacuation of the Blue Mountains community," he said.

Instead authorities were taking "a very targeted approach to securing and protecting all the communities".

An emergency warning was issued for the Blue Mountains village of Bell, where residents were urged to evacuate. Other township residents were told to shelter in their homes or warned that they faced several days of isolation without electricity.

This included people in the village of Mount Wilson, which was used as the backdrop for scenes in the recent Hollywood blockbuster "The Great Gatsby" starring Leonardo DiCaprio.

Amid the worst fire disaster in the state for nearly 50 years, New South Wales Sunday declared a state of emergency which gives firefighters the power to forcibly evacuate people, with penalties for refusing.

State Emergency Services Minister Mike Gallacher said every possible resource was being used, including firefighters drafted in from other states, with the option that the military could be deployed.

With hundreds of people evacuated due to the encroaching flames, police revealed they were dealing with reports of looting from victims, although the number of incidents was small.

State Premier Barry O'Farrell called looters "scumbags" and vowed to track them down.

Meanwhile, an 11-year-old boy was Monday charged with deliberately lighting two fires on the New South Wales Central Coast last week, one of which forced hundreds of people to flee their homes and saw the closure of Newcastle airport.

Another boy, aged 15, was also charged with "intentionally causing fire" over one of those blazes, according to the Australian Associated Press on Monday, while a 14-year-old was charged with starting a separate fire Sunday near Rutherford, a suburb north of Sydney, which was quickly extinguished.

Wildfires are common in Australia's summer months from December-February. But an unusually dry and warm winter and record spring temperatures has seen the 2013/14 fire season start early with warnings of a long, tough summer ahead.