Protesting against the decision taken by the Union Cabinet, Human Resources Development Minister Pallam Raju also offered to resign from the Council of Ministers.
"I offered my resignation to the Prime Minister. But the Prime Minister advised me not to act in haste," Raju told media.
The Union Cabinet on Thursday approved the creation of a new State of Telangana by bifurcating the existing state of Andhra Pradesh.
"The city of Hyderabad will function as the common capital for both the States for a period of ten years. The Union Cabinet has approved the setting up of a Group of Ministers(GoM) to work out the various legal and administrative measures to ensure the safety and security of the residents of all the regions of the State including the guarantee of the Fundamental Rights," the government said in a statement on Thursday.
"The Union Cabinet further approved that the GoM (Group of Minsters will go into the various issues which concern both the States and suggest appropriate measures to address them," it said.
"The GoM will also work out the modalities for the provision of special financial disbursements required for the setting up of a new capital for the residuary State of Andhra Pradesh and to meet the special needs of the backward regions and districts of the two States," the government said.
After the Cabinet meeting, Union Home Minister Sushilkumar Shinde told media, "The Cabinet approved the formation of GoM for creation of Telangana. Hyderabad will be the joint capital for 10 years."
Ahead of the meeting, protest broke out in front of Prime Minister's residence in New Delhi.
The protesters wanted a united Andhra Pradesh.
According to media reports, protests also broke out in Seemandhra region in Andhra Pradesh on Thursday.
Earlier, Andhra Pradesh Chief Minister N Kiran Kumar Reddy has said bifurcation of the state and carving a Telangana state out of it will be a big loss for the people.
"The party may win or lose an election, but the bifurcation will be a big loss for the entire state and all people," Reddy told CNN-IBN.
"There will be a severe power shortage. Naxal movement might see a return. Water distribution will be a problem."
"Hyderabad is a hub for health facilities and education. Bifurcation will be a loss for all regions in the state," he said.
India's ruling Congress party on July 30, approved a move to carve out the Telangana region of Andhra Pradesh as the 29th state of the country, giving in to a five-decade-long demand from supporters in a major decision ahead of 2014 elections.
Officially urging the government to take constitutional steps that will see the state's formation, the Congress Working Committee (CWC) passed a resolution following a meeting of the constituents of the ruling United Progressive Alliance (UPA).
The state, which is likely to take few months to be formed, is expected to have 10 districts, a population of 35.38 million and an area of 1.14 lakh square km and including Andhra Pradesh capital Hyderabad, which serve as a common capital for 10 years.
The Congress has 33 MPs from Andhra Pradesh.
As many as 19 of them are from the coastal Andhra and Rayalaseema regions to be included under Telangana state. They are opposed to the division of the state.
--IBNS (Posted on 04-10-2013)