My 250kva generator is earth however there is now smoke coming from the pit that the generator is earthed

Using an clamp on amp meter , measure the ground wire connecting to the rod, to determine if any current is flowing.

That will need to be corrected.

Could be a poor soil condition causing the ground resitance to be too high, still should not have high amps flowing to ground thou.

There is a clamp on ground rod resistance instrument available to measure the resistance of the rod.

J4, along with the recommendations of TK, you should be carefully reviewing the
Grounding and if the neutral to ground connections are correct. If this is not a separately
Derived system, the neutral should not be bonded to the ground. This may have something to do
With the "hot" ground rod if installed incorrectly.