Why Telanana?
First of all, Telangana is not a new demand. Telangana basically comprises of the districts of the erstwhile Nizam's Hyderabad princely state. After the independence, Telangana was merged into the larger Andhra state.
The States Reorganization Commission (SRC) was not in favour of merging the Telangana region with the then Andhra state. The concerns of Telanganas were manifold[citation needed]. The region had a less developed economy than Andhra[citation needed], which Telanganas feared might be diverted for use in Andhra. They also feared that planned dam projects on the Krishna and Godavari rivers would not benefit Telangana proportionately even though Telanganas controlled the headwaters of the rivers. (Source)
Telanganas feared too that the people of Andhra would have the advantage in jobs, particularly in government and education. Telangana people under Nizam had no or little education till then. Those who had were educated in Urdu. Meanwhile the people of Andhra were educated under British – learning Telugu and English. So, when the new state of Andhra Pradesh was formed, the prerequisite languages were Telugu and English, and since people of Telangana lacked education in both these languages all the initial jobs were filled up by people of Andhra causing anticipated anguish to people of Telangana.(Source)
In 1969 there was a popular student movement in Telangana and many people were killed and jailed. Following that TPS (Telangana Praja Samiti) won 11 out of 12 Lok Sabha seats on a single plank – of creating new Telangana State. Indira Gandhi snubbed that movement while the leaders of Telangana betrayed their own people by joining the Congress and Chenna Reddy became Chief Minister of the entire state. (Source)
This is quite similar to what in case of Jharkhand. A demand for Jharkhand (basically comprising of tribal districts) was also made to the SRC. However, a larger state of Bihar was created. The erstwhile state of Bihar had a total of 54 seats of which only 14 were in Jharkhand. Jharkhand is highly rich in minerals. Hence, the region which was already backward was exploited by the Biharis who were numerically superior.
BJP has always supported the Telangana movement. It was the BJP led NDA that created the states of Jharkhand, Uttaranchal and Chattisgarh in 1999. However, at that point of time they were in alliance with the TDP and hence didn't then.
Why no to Telangana?
One of the major reasons for an opposition to creation of Telangana is because the twin-cities of Hyderabad-Secunderabad lie in the Telangana region. The twin-cities have received a large investment into infrastructure particularly under Chandrababu Naidu making it preferred IT location. A large number of Telugu people are settled in the cities.
Gurgaon, another IT hub contributes about 40% of the GDP of Haryana. I do not have the similar figures for Hyderabad, but I am sure the figure would be immense, although Haryana is a much smaller state.
Another important issue is that of Naxalism which is active in the Telangana region. At a time when the Naxal movement is on the rise, it may not be the best idea to create a new state. I am not sure whether the new Govt. would be able to deal to effectively with the Naxals. Veerappan, the dreaded smuggler remained nuisance for around three decades. This is primarily because he operated in a region bordering three states Kerela, Tamil Nadu and Karnataka. Coordination among different states police was not effective.
Even in case of West Bengal, it is reported that the Maoist are much strong in the bordering districts of the state. After committing the crime they escape into the neighboring state where West Bengal police have no writ. Similar situation could now arise. The present crisis may have created some resented among the two sides and they may not co-operate with each other thus playing into the hands of the Maoists.
The present crisis
KCR formed the his new party TRS in 2001 and has been fighting for a new state. In 2004, he won fought the elections in alliance with the Congress and won. But the Congress did not keep its promise. Despite that, the party managed to win the 2009 elections. That could be attributed to the YSR magic who is no more.
Perhaps KCR feels that this is the right time to press for Telangana because the Chief Minister is still new in the job and YSR loyalists may not give him a free hand. Needless to say that the demand for Telangana runs deep and the present protests are a clear indication of that. Moreover, I don't think that it is correct for the numerically superior Telugus to decide whether Telangana stays in Andhra or not. A referendum in Telangana is perhaps the best option.