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The main objective of this paper is to enhance the power quality for grid interfaced Diesel Generation system under some non-linear load conditions using a DSTATCOM. For obtaining effective compensation characteristics the damping controller such as DSTATCOM is designed based on model control theory. In this paper a Fuzzy based DSTATCOM controller is designed and the results are compared with the conventional controllers. This Diesel Generation system is simulated in Matlab/Simulink for bothfatcat:v74jm4lq2jc3zdltdoncs4ordq