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This paper deals with different control strategies for DSTATCOM (distribution static compensator) for power quality improvement for a three-phase, three-wire distribution system. A three-leg voltage source inverter (VSI) configuration with a dc bus capacitor is employed as DSTATCOM. The hysteresis as well as PWM current controllers are designed, analyzed and compared for PI controller and sliding mode controller. The capability of the DSTATCOM is demonstrated through results obtained using MATLAB and Simulink based developed model of the DSTATCOM system. The performance of the DSTATCOM acting as a shunt compensator is found satisfactory under varied load perturbations.