The feeder reconfiguration is a process of shifting the system load from one feeder to another feeder for loss minimization in distribution system or for maintenance purpose. The present paper proposes an effective approach for feeder reconfiguration and capacitor allocation for power loss optimization and voltages profile improvement in the existing Ratnagiri city electricity distribution system of Maharashtra State, India. A scheme of feeder reconfiguration is presented with respect to existing feeders for power loss optimization. The presented paper also proposes a method to find suitable location and size of capacitors to reduce power loss due to reactive component of branch current. A sequential searching method is used to find the locations for all capacitors in distribution system and the size of capacitor at each location is evaluated by optimizing the loss saving equation. The performance of the proposed method has been investigated on the existing Maharashtra State Electricity Distribution System of Ratnagiri city and it is found that proposed method reduces power loss in existing system significantly. The proposed method enables us to obtain a near-optimal solution with the capacitor selected and proposed reconfiguration. If more switches are provided for the reconfiguration process, the results obtained can be improved still further.