Setting aside speculations about Rayala-Telangana, the cabinet decided to carve out Telangana state comprising 10 districts of the region.
Also rejecting the demand of leaders of Seemandhra (combined Rayalseema and coastal Andhra regions) for making Hyderabad a union territory, it stuck to the earlier decision that the city would be a common capital for 10 years.
The Andhra Pradesh Reorganisation Bill will be sent to President Pranab Mukherjee on Friday or Saturday, with a request to make a reference to the Andhra Pradesh assembly, Union Home Minister Sushilkumar Shinde told reporters after the three-hour long cabinet meet chaired by Prime Minister Manmohan Singh.
He said the president would send the draft bill to the assembly with a stipulated time to consider it.
After the assembly sends back the bill, it would be brought before the cabinet again and would be tabled in parliament. "We want the bill in the winter session," Shinde said.
Reading out the highlights of the bill, the home minister said the governor of Telangana would have special responsibility for protection of lives and property of people of other regions living in Hyderabad.
An expert committee would be constituted in 45 days to identify the capital of residuary state of Andhra Pradesh.
"The government will make special efforts to ensure equitable dignity and opportunity for the people of the state. Special care will be taken by the government to set up economic and social stability," Shinde added.
"The government will make special efforts towards the social and religious institutions of the state," he said.
The draft bill is based on the recommendations of the Group of Ministers (GoM), which submitted its report to the cabinet.
Ahead of the decision, police went on high alert in Andhra Pradesh on Thursday.
An alert was sounded in Hyderabad and 13 districts of Seemandhra (combined Rayalaseema and coastal Andhra) as the union cabinet began its meeting.