This paper describes a new scheme for Total Harmonic Distortion (THD) improvement in grid connected Photovoltaic (PV) systems. It is well know that the grid current THD becomes significantly poor during low solar radiation intervals. A variable hysteresis band control can be used to improve the THD, but it results in very high switching frequency of the inverter which may not be feasible from switching devices' point of view. The concept of Step Variable Inductor (SVI) is introduced, where by it is possible to use variable inductance values in the inverter output to achieve significant improvement in the THD over and above what is achievable with a variable hysteresis band alone. The proposed SVI approach is implemented in conjunction with variable hysteresis band control and it is observed that the THD remains significantly low even during low radiation periods. Thus the proposed scheme ensures that the THD in the injected grid current, remains within the limits specified by IEEE-519, IEEE-1547 under a wide variation of solar radiation, while ensuring the switching frequency of the power inverter does not prohibitively high and always remains within the specified limits. All the details of this work are presented. © 2010 IEEE.