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Active and reactive power flow control and power quality improvement of a two level Voltage Source Converter (VSC) based High Voltage Direct Current (HVDC) system operating at fundamental frequency switching is proposed in this paper. Two converter stations used in this HVDC system consists of two level VSC configuration to achieve active and reactive power control with fundamental frequency switching. The reactive power is independently controlled in each converter station. A coordinated control algorithm is proposed for both the rectifier and an inverter stations for bidirectional active power flow. This results in a substantial reduction in switching losses and avoiding reactive power plant. MATLAB based simulations are carried out to verify and to validate the proposed control method of the VSC based HVDC system for bidirectional active power flow and their independent reactive power control.