"We will put up the Muslim Reservation Bill in the coming Budget session itself," he said in the Assembly during a debate on welfare of minorities.
The budget session is expected to begin next month.
The 12 per cent reservation to Muslims was a key election promise of the ruling Telangana Rashtra Samithi (TRS).
The state government had appointed a Commission for conducting a study of social and economic status of Muslims and the panel has submitted its report, Rao said in a statement on the issue.
The BC Commission is gathering views of different groups in the matter for expressing its opinion, Rao said.
"In order to provide 12 per cent reservation to Muslims, a relaxation should be given to the stipulation that the reservations should not exceed 50 per cent.
"The Government of Tamil Nadu introduced Act 45/94 and with the consent of Indian Parliament got incorporated the issue of enhancement of reservation in the 9th Schedule of the Indian Constitution. We will follow the same policy in our state also," Rao said in his statement.
BJP floor leader G Kishan Reddy said the high court had already held that reservations on the basis of religion is against the Constitution.
The issue is also sub-judice as the matter of four per cent quota (being given to backward sections among Muslims that began in undivided AP) is in the Supreme Court, he said.
Rao, however, clarified that the proposed quota is not for Muslim religion.
(Reopens BES 25)
The government is making efforts to see that benefits of welfare schemes reached the economically backward sections among OCs as well, Rao said.
He also said the Rajinder Sachar Committee, that studied the conditions of Muslims, was appointed during the UPA-I as he had forcefully raised the issue then.
Rao was a minister in the Congress-led UPA government.
"If Justice Rajinder Sachar Committee was appointed, it was because I raised it, because TRS raised it in UPA. MP (of MIM) Asaduddin Owaisi was witness to that. Muslim leaders and other leaders congratulated me," he said.
Rao, on the occasion, announced several steps for the welfare of minorities, including setting up 200 schools for minorities and giving judicial status to Waqf board.
Responding to a suggestion of MIM floor leader Akbaruddin Owaisi, the Chief Minister said an Islamic Centre, including a convention centre within its premises, would be built in the city.
After the debate ended on welfare of minorities, the House was adjourned sine die. The winter session of Legislative Assembly was held for 18 days.
The party-wise strength in the Assembly as announced by Speaker S Madhusudanachary was as follows: TRS- 82, Congress- 19, MIM- seven, BJP- five, TDP- three, CPI- one, CPI(M)- one, Independent- one and Nominated- one.
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