This paper presents an efficient method for real power loss minimization and for improvements in voltage profiles. This method is accomplished by optimal control of reactive power in the system. The problem is formulated as an optimization problem, suitable for solution by linear programming technique. After establishing the objective function for minimizing the system losses with the help of linearised sensitivity relationships of control variables, i. e., the transformer tap position, generator terminal voltages and switchable reactive power sources. The linear programming technique is used to determine the optimal adjustments to the above variables, simultaneously satisfying the constraints. The proposed algorithm has been tested on a sample system and the result is presented and discussed.