OBJECTIVES:  The aim of the study was to determine in Study cost of illness and cost of utility analysis in the population. And decreasing the economic burden of the treatment by following the life style modifications. METHODS: study involving cohort study design. Totally of 132 diabetic patients are included. In-patients and out patients of medical and surgical department in RDT hospital, Bathalapalli – a secondary level referral hospital at rural Anantapur, AP are involed in the study period of 6 months range from August 2012 to January 2013. All in patients and out Patient who are diagnosed as Diabetic type-II, Continuing anti diabetic drugs for their diabetes management are included and Patient who are diagnosed as Diabetic type-I and pregnancy and pediatric patients were excluded.. RESULTS: A totally of 132 diabetic patients, in which male and famales are near by equal in number. Based upon the comorbidity conditions most of the subjects (69% ) were suffering with diabetes+hypertension. Most of the subjects(9.9%) having comorbidity conditions of diabetes+hypertension+acute renal failureand these people are spending more money to the treatment. The average utility of drugs is more for the combination of Met+Glib+Ins than metformin+glibenlamide .Chalrson Co morbidity Index is more for the people are present in the age group of 61-70 years. cost of hospitalization with co morbidities is more(95515rs) for DM+ HTN.  CONCLUSIONS: Finally we concluded that, anantapur is a rural area, most of people are with poor knowledge and lack of awareness. By applying all those patients in Charlson Co morbidities index we found, patient’s economic status through year wise. It says many of the diabetic patients facing economic burden, especially daily wager are feeling much difficulty to face even therapy cost also. In co morbidities side we noticed most of the patients are Diabetic with hypertension, they are 55% in my study population.