This paper presents the reactive power management for 765 kV Extra High Voltage (EHV) transmission system. Reactive power compensation is used to control the power system voltage stability and increase the power transfer capability of the transmission line. The proposed 765 kV transmission line between Sipat—Seoni in India is simulated on PSCAD Library. The shunt compensation has been stimulated in the transmission line to maintain the system voltage. The effect of voltage, active power and reactive power has been studied at different transmission length and verifying the optimization transmission length for high power transfer. In order to increase the power transfer capability of the transmission system the series compensation is used. The work presented here also compares the shunt and series compensation using PSCAD simulation for better voltage control and its performance for power transfer capability.