The Group of Ministers (GoM), which is reviewing and discussing the proposed bifurcation of Andhra Pradesh, met leaders from coastal Andhra and Rayalaseema on Wednesday.
The bifurcation move has revived deep political divisions and raised fears of violence in the area.
In July this year, the ruling Congress Party approved the creation of a new Telangana state, which had raised fears of violence in the area.
Tourism Minister Chiranjeevi said after the meeting that Hyderabad should be made the common capital.
"If we did not make it (Hyderabad) a common capital, it does not carry any meaning. So, there is no common capital in the Constitution of our country, but Union Territory, yes, it can accommodate, it can provide, it will take care of the interests of the people who are living in and around Hyderabad," he said.
Congress leader from Andhra Pradesh Jesudasu Seelam said: "Today, the central ministers from the regions of coastal Andhra and Rayalaseema, we met Mr. Jairam Ramesh and reiterated our demands. The demands included the status of Hyderabad."
Senior Congress leader Digvijay Singh said: "The stage is that the (GoM) is meeting and would be sending the bill to the Andhra Pradesh assembly as soon as possible."
The decision to break up Andhra Pradesh and establish a new state of Telangana comes ahead of elections next year, and critics say the ruling party is seeking to shore up its political fortunes after dragging its feet over the explosive issue for four decades.
Supporters, however, say Telangana's economic development has been neglected in favour of the richer and more powerful Andhra region, and that a new state is the only solution.
Hyderabad, India's sixth largest city, was a bone of contention because it fell in the proposed new state carved out of the western part of Andhra Pradesh.
Andhra Pradesh first came into existence after a hunger strike. Potti Sriramulu, a follower of revered freedom fighter, Mahatma Gandhi, died in 1952 after a two-month fast for the creation of the state.
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