The use of various inductive equipment like electric motors, furnaces etc. in the industries adversely affects the power factor of the supply. Due to inductive loads, the apparent power becomes greater than the real power that increases the phase difference between voltage and current. So, the power factor drops below unity and the system becomes less efficient. This project deals with correcting the power factor so that it becomes approximately unity. The available power factor correction equipment are very expensive which prevent their use in households and small scale industries. A power transducer is used to get the power factor of the electric circuit. The collected information is given to a microcontroller which is programmed to connect the required capacitors in parallel across the load so that the power factor becomes approximately unity. Our aim is to make a low cost power factor correction equipment, which reduces the power consumption in common households and industries.