The objective of the work is to apply higher percentage of neat vegetable oil in diesel engine without any fuel treatment. From previous literatures it is well known that the use of neat vegetable oil more than 20% direct to engine operational problems and lube oil dilution. The use of higher percentage of neat Paradise Tree oil (50% by volume 50PTO) in the form of paradise tree oil and diesel blend in an engine using modified engine operating variables are studied in this project. The universal engine operating Variables like compression ratio (CR), intake air temperature (IAT), injection pressure and injection timing were optimised using Taguchi and Grey Relational method. The optimised variables were analysed using ANOVA, to know the influence and percentage contribution of involved variables on expected response variables such as BTE, CO, HC, Smoke and NO. Besides a thorough engine test was conducted using 50PTO to study its performance, emission and combustion characteristics. The results of the experiments proved that the application of 50PTO performed well and emissions were less. The results of the experiments were used to develop a non linear regression equation for various response variables.