The Khalsa College Governing Council (KCGC), however, was not impressed with the decision which it called "most unfortunate" and accused the state government of playing to the gallery.
The decision was taken by the state cabinet at a meeting chaired by Chief Minister Amarinder Singh here.
"The Cabinet termed as appalling the move by the Khalsa College Society to destroy its rich heritage status by converting the prestigious institution into the university," an official spokesperson said.
"It also noted that taking away a chunk of land from Khalsa College to make a university would adversely affect the existence of Khalsa College," he said.
The Cabinet also opined that all the properties attached to the Khalsa College should be kept intact, thus also preserving its architectural grandeur and marvel.
The decision to set-up Khalsa University was taken by the previous SAD-BJP alliance government in 2016.
The move was however widely criticised. Among its critics were the residents of Amritsar, the college's alumni and the intellectuals of the state.
Amarinder Singh had promised to protect the legacy of Khalsa College, which is one of the oldest educational institutions in the country with a heritage status.
"In rejecting the establishment of the university, the Cabinet also felt that there was no point in establishing an additional university in Amritsar, which already has several reputed institutions of higher learning," the spokesperson said.
The top functionaries of the varsity however expressed disappointment over the decision and said they were seeking legal opinion to 'save' the University which has already registered more than 300 students in various classes from graduate to PhD courses following government's nod to the varsity in August 2016.
KU Chancellor Satayjit Singh Majithia and Pro-Chancellor Rajinder Mohan Singh Chhina, in a joint statement today, said a false propaganga has been unleashed that Khalsa University threatens the existence of the historic Khalsa College.
"The petty and vendetta politics is being played to kill the educational project which is boon for the education sector in the border region," said Majithia.
"There is not even an iota of truth in the argument that varsity hampers the heritage building. The College is functioning as an autonomous institution and University is coming up in separate buildings," he added.
He also discredited the claim that chunk of land has been taken away from Khalsa College for the University and said the land is already earmarked to the already established colleges which are part of the University and no more land is being taken.
The KCGC, set up in 1890, is a democratically-elected body which runs Khalsa College and Khalsa University separately.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)