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UNCLAS SECTION 01 OF 04 HYDERABAD 000124 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR SCA/INS 
 
E.O. 12958: N/A 
TAGS: PGOV PTER PREL PINR KDEM IN
SUBJECT: TELANGANA - THE REACTION 
 
REF: A) NEW DELHI 2472, B) HYDERABAD 121, C) HYDERABAD 89 
 
HYDERABAD 00000124  001.2 OF 004 
 
 
¶1.  SUMMARY: Indian Home Minister P. Chidambaram's announcement 
on Telangana statehood resulted in a revolt in the Andhra 
Pradesh (AP) state legislature, with an en masse "resignation" 
of state legislators.  The resignations cut across party lines 
as political parties backtracked from established positions to 
appease party members.  The GOI's action sparked anti-statehood 
civil unrest in the other two regions of AP.  So far American 
businesses are unfazed, even as both a political solution and 
the future status of the capital Hyderabad remain uncertain. END 
SUMMARY. 
 
 
Headed Towards Resolution Or Dissolution? 
----------------------------------------- 
 
¶2. (U) Media reports on December 11 indicate that an additional 
60 Members of the Legislative Assembly (MLA) tendered their 
resignations in protest of the GOI's December 9 "midnight" 
announcement on initiating the process of forming a Telangana 
state.  Including the 70 MLAs who took the same step yesterday 
(REF A), this brings the total resignations to 130 of the 294 
members in the state assembly. 
 
¶3. (SBU) The so-called resignations include 76 out of 156 the 
ruling Congress party's MLAs, 40 of 92 Telugu Desam Party (TDP) 
MLAs, and 14 of 18 from the Praja Rajyam Party (PRP).  None of 
those who resigned are among the 119 MLAs who represent 
constituencies in the Telangana region.  Principal Secretary 
(Political) of the AP state government R.M. Gonela told PolOff 
that the primary reason cited by resigning MLAs was that New 
Delhi's decision "seemed quick and arbitrary" and was taken 
"without consultation." 
 
¶4. (U) To date none of the resignations are official as they 
must be accepted by the Speaker of the House to become 
effective.  Local media reported that the Speaker will decide on 
the resignations only after consulting with the Advocate General 
and meeting individually with each MLA.  News reports also 
indicate that the Congress leadership in New Delhi has started 
to meet with disaffected party members to discuss ways to 
resolve this impasse.  No decisions can be made until the state 
assembly reconvenes on December 14. 
 
¶5. (U) In the midst of this flurry of resignations, AP Chief 
Minister (CM) K. Rosaiah sought to allay legislators' concerns 
by reminding them that a resolution on Telangana statehood must 
receive "the support of a majority" of the state assembly.  If 
the resignations are accepted the state assembly would be left 
with only 164 sitting MLAs (Congress - 87, TDP - 52, PRP - 4, 
Telangana Rashtra Samithi (TRS) - 10, All India 
Majlis-e-Ittehadul Muslimeen (MIM) - 7, Communist Party of India 
(CPI) - 4, Communist Party of India (Marxist) - 1, Bharatiya 
Janata Party - 2, Lok Satta Party - 1, and 3 Independents).  To 
achieve a majority of votes the Congress would need to receive 
support from a significant number of MLAs from TDP, its local 
rival. 
 
 
TDP Bucks the Trend 
------------------- 
 
¶6. (U) TDP Leader N. Chandrababu Naidu stepped back from his 
promise to back Telangana statehood only a day after stating 
that his party would not oppose a resolution.  He was seemingly 
stunned by the mass resignation of TDP MLAs from Rayalaseema and 
Coastal Andhra - the heartland of the party's vote bank and a 
major source of the party's financial support.  Needing to 
appease party members from these two regions, Naidu quickly 
charged Congress leader Sonia Gandhi of acting with "unnecessary 
and undue haste" and denounced the "unilateral" decision on 
Telangana. 
 
 
 
HYDERABAD 00000124  002.2 OF 004 
 
 
Congress/TRS Part Deux 
---------------------- 
 
¶7. (U) To counter the opposition's allegation that Congress was 
forced into hurrying a rash decision, Indian Law Minister 
Veerappa Moily - who is also All India Congress Committee 
General Secretary in-charge of Andhra Pradesh - stalled, telling 
media that "Congress takes the right decision at the right 
time."  Some commentators observed that Moily's statement is an 
indication of Congress' intention to push the issue to the 
backburner now that the immediate crisis has been diffused. 
This perception was first bolstered by CM Rosaiah's statement on 
"the need for consensus" over what is expected to be a 
contentious issue and then solidified by Finance Minister (FM) 
Pranab Mukherjee's statement that "any forward movement on the 
issue is contingent upon a pro-Telangana resolution [being] 
adopted by the AP assembly by consensus.  No assembly resolution 
- no Telangana."  [COMMENT: On December 10 every media outlet in 
the state prominently reported that a state resolution is not a 
required step on the path to statehood, which can only be 
attained through an act of Parliament. END COMMENT] 
 
¶8. (U) Recovering from his fast, TRS leader K. Chandrasekhar Rao 
(KCR) declined to speak to the press.  However, his party made 
clear its demand that the GOI quickly draft a bill on Telangana 
statehood for Parliamentary consideration in New Delhi.  The TRS 
is determined to quickly capitalize on its recent victory and 
not be put off as it was after the 2004 election.  At that time 
the Congress sealed a winning election alliance with the TRS by 
promising to constitute a 2nd States Reorganization Commission 
as part of the United Progressive Alliance's (UPA) Common 
Minimum Program.  The promise was kept and a committee was 
organized - but it never met.  KCR remained a GOI Minister for 
two years before he resigned from the cabinet, alleging Congress 
had reneged on its promise. 
 
 
KCR: Leading the Way or Riding a Wave? 
-------------------------------------- 
 
¶9. (SBU) While KCR is credited with reviving the Telangana 
movement, many consider him a political survivor rather than a 
standard bearer for the Telangana cause.  His indefinite hunger 
strike has been characterized as the last ditch effort of a 
faltering politician whose party, marginalized in the last 
state-wide election six months ago, did not even field 
candidates in the recent Hyderabad municipal elections due to 
lack of support.  Lalitha Iyer of "The Week" magazine told 
PolOff that KCR receives the focus of the media because "there 
is no one else" to report on.  She also emphasized that though 
the student groups were the driving force behind the protests, 
there is no recognizable student leader in the region due to the 
ban on student elections at all AP state universities and 
colleges. 
 
 
Raising the Specter of Naxal Inroads 
------------------------------------ 
 
¶10. (U) Media reports suggest that state and police officials 
believed that Naxalite elements were using the pro-Telangana 
student movement to move from rural AP to urban pockets in order 
to instigate violence.  Naxalite groups have consistently 
supported the demand for a separate Telangana state, but were at 
odds with the TRS which they accuse of monopolizing the movement 
to create a "feudal" state.  AP Congress Committee (APCC) 
President D. Srinivas told NDTV on December 3 that "When there 
is a movement and activities like these happen, infiltration 
will take place." 
 
¶11. (U) In the days immediately preceding the planned march on 
the state assembly building (REF B), the "Financial Express" 
quoted an anonymous police source that the students were being 
directed "every hour on what to do at every turn. There is a 
 
HYDERABAD 00000124  003.2 OF 004 
 
 
suspicion that some of the student leaders are influenced by 
Left ideology and the Naxalites and they are directing the 
students to violent behavior."  The next day State Police 
spokesperson Inspector General of Police (Vigilance) A.R. 
Anuradha said, "We have received intelligence reports that the 
movement has gone out of the students' hands and that Maoists 
and other professional agitators are moving in.  Given the 
situation we did not wish to take any chance with law and order 
problem."  To bolster local Hyderabad's police force the state 
government called in an additional 23,000 police officers from 
Coastal Andhra and Rayalaseema, leaving these regions vulnerable 
to civil unrest. 
 
 
Universities in Coastal Andhra and Rayalaseema Erupt 
--------------------------------------------- -------- 
 
¶12. (U) The successful precedent set by the pro-Telangana 
student protesters prompted students at Andhra University 
(Vishakhapatnam) and other universities throughout Coastal 
Andhra to stage "anti-bifurcation" protests on December 10. 
Coastal Andhra students closed schools, blocked regional 
transportation links, and burnt effigies of KCR to voice their 
opposition to Telangana statehood.  In Rayalaseema the 
protesters took to the streets to demand the creation of a 
"Greater Rayalaseema" state that would include two neighboring 
Coastal Andhra districts. 
 
¶13. (U) A key issue for many of these students is guaranteed 
access to the opportunities represented by the vibrant job 
market in Hyderabad's Information Technology (IT), 
biotechnology, and pharmaceutical industries.  With almost 1000 
MBA and MCA colleges and over 500 engineering colleges in the 
state, AP produces more engineers than any other state in India. 
 The students fear that if the state is split, those coming from 
other regions in search of jobs will be unwelcome in a 
Telangana-controlled Hyderabad. 
 
 
Whither Hyderabad? 
------------------ 
 
¶14. (U) The uncertainty surrounding the fate of Hyderabad, AP's 
capital, was reinforced as a central point of contention.  On 
December 11 Indian Home Secretary G.K. Pillai caused an uproar 
when he told journalists that the process of forming a separate 
Telangana state had already commenced and Hyderabad would be the 
capital of the state.  He retracted the statement only a few 
hours later.  Supporters of a Telangana state continued to 
reiterate their belief that the city is the heart of the region, 
even as MLAs from Coastal Andhra and Rayalaseema staked their 
claim to the hi-tech hub saying residents of both regions had 
"invested a large amount of money in Hyderabad and the state 
capital belongs to the entire state."  Both groups were opposed 
by a group of eleven Congress municipal legislators representing 
settlers from outside of Telangana who demanded Union Territory 
status for the city in the event that the AP carved into 
different states.  The All India Majlis-e-Ittehadul Muslimeen, 
which represents much of the 40 percent of Hyderabad's 
population that is Muslim, has adopted a "watch-and-wait" 
approach.  Although in principle the party favors smaller 
states, it demands that minority groups be consulted and given 
assurances on safety and security before announcing the party's 
position on Telangana statehood. 
 
 
International Business Reacts 
----------------------------- 
 
¶15. (SBU) Despite the political turmoil, international 
businesses located in Hyderabad seem scarcely fazed by recent 
developments.  Hari Kumar, Managing Director of Deloitte U.S. in 
India said that the Congress decision "will have no effect at 
all" on business and that the company did not foresee "any 
 
HYDERABAD 00000124  004.2 OF 004 
 
 
change in its commitments to current or future investment 
decisions."  He observed that a new state would only impact 
business if there was a change to the legal environment.  [NOTE: 
Hari Kumar informed PolOff that along with the heads of other 
international firms, he was invited to participate in a meeting 
with Indian Prime Minister Manmohan Singh and FM Mukherjee on 
December 15 to discuss perceptions of India as a destination for 
future IT investment. END NOTE] 
 
¶16. (SBU) Srinivas R. Peddi, head of IBM in Hyderabad, said 
"Frankly speaking there was next to no impact" on business 
except that some employees needed to telecommute due to 
transportation difficulties. However, he commented that there 
was the potential for a negative image of Hyderabad to emerge if 
political instability resulted in more violence and forced an 
extension of the U.S. Travel Alert issued on December 9. 
 
¶17. (U) Som Mittal, President of the National Association of 
Software and Services Companies (NASSCOM), the premier Indian 
association of IT-BPO companies in India, told the press, "We 
see no negative impact on IT companies in the long run. In the 
short term, there will be concerns on ongoing projects like the 
ring road which is being built, or the enhancement of 
e-governance." 
 
 
Changing Players Before The Final Act 
------------------------------------- 
 
¶18. (SBU) COMMENT: Given the financial difficulties of the 
state, then-AP State Finance Minister and senior AP Congress 
leader K. Rosaiah seemed a logical "caretaker CM" after the 
death of YSR Reddy (REF C).  This was especially so since the 
Congress leadership needed a "neutral candidate" to stave off a 
succession battle between the supporters of YSR's son Jagan 
Mohan Reddy and Telangana Congress leaders sidelined by YSR such 
as APCC President D. Srinivas and Member of Parliament 
Hanumantha Rao.  However, this compromise left the new CM on 
shaky ground.  In the initial weeks of his tenure, Rosaiah 
proved unable to quell party infighting.  Following a quick 
succession of crises, he is perceived as beleaguered and weak - 
a pale shadow of YSR, who the Congress leadership could not 
afford to ignore.  Now the CM's control of the state legislature 
is being questioned due to his inability to stem the tide of 
resignations, even by his own party members. 
 
¶19. (SBU) The national Congress leadership has been battered by 
criticism for their handling of the Telangana decision, which 
seemed to take not only rival parties by surprise, but also CM 
Rosaiah and other local Congress leaders.  While the Congress 
Party may have temporarily lost the initiative in AP, it is 
still in power both at the state level and in New Delhi.  This 
gives it the capacity to shape events in AP and should provide 
the leadership with the flexibility and the time necessary to 
reunify and strengthen the local party - or a least find someone 
to take the fall. END COMMENT. 
WURR