Investigations are carried out to evaluate the performance of a low heat rejection (LHR) diesel engine with ceramic coated cylinder head [ceramic coating of thickness 500 microns is done on inside portion of cylinder head] with different operating conditions [normal temperature and pre-heated temperature] of crude Pongamia oil (CPO) with varied injection pressure and injection timing. Performance parameters and pollution levels are determined at various magnitudes of brake mean effective pressure. Combustion characteristics at peak load operation of the engine are measured with special pressure-crank angle software package. Conventional engine (CE) showed deteriorated performance, while LHR engine showed improved performance with CPO operation at recommended injection timing and pressure and the performance of both version of the engine is improved with advanced injection timing and at higher injection pressure when compared with CE with pure diesel operation. The optimum injection timing is 31°bTDC for conventional engine while it is 29°bTDC with LHR engine with vegetable oil operation. Peak brake thermal efficiency increased by 5%, smoke levels decreased by 2% and NOx levels increased by 40% with CPO operation on LHR engine at its optimum injection timing, when compared with pure diesel operation on CE at manufacturer’s recommended injection timing.