Apple tech representative decided to give me an exception and approved an exchange with a service unit (with no additonal cost). I took it to the store last week. The store representative did a battery diag again as part of the procedure and brought a replacement iphone 5 packed in a different type of box.
The box didn't look like the real iphone 5 box and when she took the sticker off the box, I found that the phone had lost of dust over it. Also, it had scratches around. I've claimed that it was a refurbished phone. I requested her to give me a better clean phone without any scratches. She was kind enough and brought three other boxes and we opened every box and compared them to pick a better refurbished phone which apple calls as 'Service Unit'
Also, I selected a phone and found that it had iOS 7.0.4 pre-installed. I asked the representative not to upgrade it.
Atleast, I got a better phone now with a older version of iOS and 90 days warranty on it.
The tech representative followed up on this issue in email. I thanked him for replacing my out of warranty device. he said that, if there was any hardware failure, he would've authorized to replace it with a new phone instead of a service unit.
The battery is much better now. It goes from 100% to 0% in 20hrs roughly with moderate usage.
I follow simple strategy
1. Switch of Cellular Data 4G when I'm not going to use the phone for few hours.
2. When I come back to home, I use WiFi and switch off Cellular Data 4G.
3. Stopped Background App refresh completely
4. Stopped Location Services
5. Close all the apps running in background as soon as I'm done using them
6. Uninstalled facebook, other heavy loaded apps.
7. Didn't upgrade it to iOS 7.1
8. Disabled notification - banner services for many apps. But kept the Badge icon active.
9. Charge the phone only when it reaches below 20% battery.
10. Switch off bluetooth when not in use.