While running a 1.5 MW induction motor at 80% of full load, how can we determine the effect of reduced power factor(.88 to .87) on the real power consumption, the losses because of the same.

Murari,

You could go into your text on electric machine basics and do some fairly complicated vector math on the two different conditions, or you could simplify everything and just calculate the difference between the magnitudes of the per unit currents at the two power factors, square that difference and use that as the percentage change in overall loss. I wouldn't expect it to vary by much at those pfs, all other things being equal.

Alan

System loss reduction should be relatively easy to determine. You should be able to determine the resistance component of the system impedances or assume typical values from various references. And similar to what Alan suggested, you square the difference between the uncorrected current and the current with PF correction and multiply that by the resistance.