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The automobile industry is concerned the new alternative fuels are being developed to replace conventional petroleum oils. Biodiesel, one of the alternative fuels can be the best choice for engine especially when blended with diesel. In blended form with diesel it improves the efficiency of Compressed Ignition engine reduces emission, and more important reduces stress on the diesel. Variable compression ratio Engine Test Setup is used for conducting trials. It uses Eddy Current Dynamometer for loading the engine. Engine tests were conducted using various blends of biodiesel with the diesel viz. KBD5 (5% Karanja biodiesel+95% diesel) KBD10 and KBD15 as a fuel. In addition exhaust gas analysis is carried out for different blends and compression ratios to check the amount of CO, CO2, HC and NOx in the exhaust of engine. Various performance characteristic were plotted and studied which leads to the final conclusion that blends are efficient and especially KBD10 is more useful.