Andhra Pradesh's main opposition Telugu Desam Party on Monday suffered a major setback with its number two leader quitting the organisation, following differences with party chief N Chandrababu Naidu over separate Telangana statehood issue.

Soon after Goud's exit, another Telangana leader and former minister E Peddi Reddy too quit the party and vowed to work with Goud for Telangana cause.

Goud, a strong votary of Telangana statehood cause, sent his resignation letter to Naidu. He sent a separate letter to Assembly Speaker K R Suresh Reddy resigning from membership of the house.

The sudden decision of Goud jolted the regional party, which is traditionally opposed to division of the state.

"As a son of Telangana, it is my duty to take up Telangana cause and stand by the people who have suffered neglect for six decades," Goud, a polit bureau member and a former minister, said in the resignation letter.

Naidu, who is touring coastan Andhra region, said Goud acted in haste and ruled out any mediation efforts. "We are not opposed to Telangana demand. But the issue is sensitive and complex. Wide public debate is important before we take a decision on the issue," he said.

There is speculation that Goud may float his own outfit, roping in like-minded leaders from other parties. The exit of Goud and his followers is likely to hit TDP in Telangana region ahead of next year's elections.

Meanwhile, Chief Minister Y S Rajasekhara Reddy and PCC Chief D Srinivas described the development as an internal matter of TDP, even as the ruling party is watching the developments in the main opposition camp with glee.