This paper presents the performance of a SyRG (Synchronous Reluctance Generator) for DG (Diesel Engine Driven Generator) set based standalone generating system. A STATCOM (Static Compensator) is used for its voltage control, harmonics reduction and load balancing on a SyRG based DG set. The proposed system consists of a diesel engine driven specially designed SyRG with a rating of 3-phase, 3.7kW, 50Hz, 4-pole, 230V line voltage SyRG, an excitation capacitor bank of 6.25kVAr and a STATCOM of 5kVA. The modified PBT (Power Balance Theory) based control algorithm is used to estimate the reference source currents for control of STATCOM. A DSP (dSPACE) is used to implement this control algorithm of STATCOM. The performance of the proposed system is studied using STATCOM which improves the performance by exchanging the reactive power with the system. The source of reactive power is a capacitor bank and VSC (Voltage Source Converter) with a DC link capacitor used as STATCOM. The gating signals of VSC of the STATCOM are generated using PBT based control algorithm. The energy stored in the DC link is exchanged with the system to eliminate harmonics, voltage regulation and load balancing. The performance of the SyRG based standalone DG system is observed under a linear load of 3.19kW with power factor of 0.8 and a nonlinear load of 2.99kW under both balanced and unbalanced conditions. The proposed system has maintained fixed terminal voltage at 220V, voltage and current harmonics within 5% under highly nonlinear load and balanced source currents under highly unbalanced load currents.