The Centre on Thursday took the first significant step towards creation of a separate Telangana state from out of Andhra Pradesh and decided that Hyderabad will be the joint capital of the two states for 10 years.

Over two months after the Congress Working Committee put its seal of approval, the Union Cabinet approved the proposal of the Home Ministry for creation of the 29th state and decided to set up a Group of Ministers (GoM) to work out modalities.

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"The Cabinet has given its approval for the creation of a new state of Telangana," Home Minister Sushilkumar Shinde told reporters after the meeting that lasted more than two hours.

He said it was decided that Hyderabad will be the common capital of the two bifucated states for 10 years.

After the creation of the new state, the security and guarantees including fundamental rights of the people of coastal Andhra, Rayalaseema and Telangana will be ensured, he said.

The Cabinet approved a GoM that will go into the issue of a special financial disbursement that may be required from the central government for the residuary state of Andhra Pradesh, for building its capital and to cater to special needs of the backward regions.

The new state will have a geographical area of 10 of the 23 districts of undivided Andhra Pradesh.

Today's decision brings to fruition the announcement made by the then Home Minister P Chidambaram on December 9, 2009 for creation of Telangana.

The Cabinet took the momentous decision despite stiff opposition from within Congress leaders from Seemandhra region, including Chief Minister Kiran Kumar Reddy and Union Ministers and MPs. Some of them even hreatened to quit.

Ever since the CWC took the decision, there have been agitations against the bifurcation in the Seemandhra region.

In a bid to assuage feelings in the Seemandhra region, the Congress set up a committee headed by Defence Minister A K Antony to look into the grievances.

"The Cabinet has approved a Group of Ministers to determine an appropriate mechanism to ensure legal and administrative measures for both the successive states of the government to function from the common capital of Hyderabad for 10 years and to ensure safety and security of the residents of all three regions -- Coastal Andhra, Rayalaseema and Telangana, including guarantees of their fundamental rights.

"The Cabinet also approved.. further sought from the GoM to determine a special financial disbursement that may be required from the central government revenues that would be available to the residuary state of Andhra Pradesh for the formation of new capital and to meet the special needs of backward region of the state," Shinde said.

The districts that to be part of the new state will be Adilabad, Karimnagar, Khammam, Mahaboobnagar, Medak, Nalgonda, Nizamabad, Rangareddy and Warangal besides Hyderabad.

The Cabinet decision was on the lines of the July 30 CWC resolution which said, "It is resolved to request the Central government to take steps in accordance with the Constitution to form a separate state of Telangana ......within a definite timeframe.

The CWC had also decided to recommend to the government that Hyderabad be made the joint capital of the newly-proposed state and the other regions--Rayalaseema and Coastal Andhra--for a period of 10 years.

The momentous CWC decision came after hectic consultations, which involved consultations with UPA allies also.