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In this paper, a low cost implementation using a single-phase to three-phase PWM converter for low power three-phase induction motor drives is proposed, where a single-phase half-bridge PWM rectifier and a 2-leg inverter are used. In addition, the source voltage sensor is eliminated with a state observer which controls the deviation between the model current and. the system current to be zero. Even though the converter topology itself is of lower cost than the conventional one, it has such functions as sinusoidal input current, unity power factor, do output voltage control, bidirectional power flow and VVVF output voltage. The experimental results for V/F control of 3Hp induction motor drives have been shown.