A method to estimate one or more equivalent parameters for at least one external network associated with an internal network (104. 301, 401) in a power system, wherein the method comprising: establishing, by an estimation system, a simplified network for a power system comprising an internal network (104. 301, 401) and at least one external network, based on at least one of state variables and measurements of the internal network (104. 301, 401) and one or more boundary buses of the power system, wherein the at least one external network is represented as a bus with plurality of predefined state variables (502.1, 502.2) for the at least one external network, to establish the simplified network; estimating, by the estimation system, one or more network parameters, such as power flow or state variables in the one or more boundary buses, for the at least one external network, based on the simplified network and the plurality of predefined state variables (502.1, 502.2), using an optimization technique; performing, by the estimation system, tuning of the one or more network parameters with respect to the state variables and the measurements of the internal network (104. 301, 401) and the one or more boundary buses, by performing the steps of: performing, by the estimation system, a state estimation of the power system using the one or more network parameters; determining, by the estimation system, a residual associated with the state estimation of the power system, wherein the residual is compared with a threshold value; and optimizing, by the estimation system, the one or more network parameters for performing further state estimation of the power system, when the residual is determined to be greater than the threshold value, wherein the tuning is performing until the residual is determined to be lesser than the threshold value; and providing, by the estimation system, the one or more network parameters as one or more equivalent parameters for the at least one external network, characterized in that the optimizing of the one or more network parameters is performed by: splitting the bus for the one or more boundary buses; and varying values of the one or more network parameters for each of the one or more boundary buses, to minimize residuals associated with at least one of real power, voltage, angle, reactive power of the internal network (104. 301, 401) and the one or more boundary buses. establishing, by an estimation system, a simplified network for a power system comprising an internal network (104. 301, 401) and at least one external network, based on at least one of state variables and measurements of the internal network (104. 301, 401) and one or more boundary buses of the power system, wherein the at least one external network is represented as a bus with plurality of predefined state variables (502.1, 502.2) for the at least one external network, to establish the simplified network; estimating, by the estimation system, one or more network parameters, such as power flow or state variables in the one or more boundary buses, for the at least one external network, based on the simplified network and the plurality of predefined state variables (502.1, 502.2), using an optimization technique; performing, by the estimation system, tuning of the one or more network parameters with respect to the state variables and the measurements of the internal network (104. 301, 401) and the one or more boundary buses, by performing the steps of: performing, by the estimation system, a state estimation of the power system using the one or more network parameters; determining, by the estimation system, a residual associated with the state estimation of the power system, wherein the residual is compared with a threshold value; and optimizing, by the estimation system, the one or more network parameters for performing further state estimation of the power system, when the residual is determined to be greater than the threshold value, wherein the tuning is performing until the residual is determined to be lesser than the threshold value; and performing, by the estimation system, a state estimation of the power system using the one or more network parameters; determining, by the estimation system, a residual associated with the state estimation of the power system, wherein the residual is compared with a threshold value; and optimizing, by the estimation system, the one or more network parameters for performing further state estimation of the power system, when the residual is determined to be greater than the threshold value, wherein the tuning is performing until the residual is determined to be lesser than the threshold value; and providing, by the estimation system, the one or more network parameters as one or more equivalent parameters for the at least one external network, characterized in that the optimizing of the one or more network parameters is performed by: splitting the bus for the one or more boundary buses; and varying values of the one or more network parameters for each of the one or more boundary buses, to minimize residuals associated with at least one of real power, voltage, angle, reactive power of the internal network (104. 301, 401) and the one or more boundary buses.