The cabinet meeting, chaired by Chief Minister Y.S. Jagan Mohan Reddy, accepted the proposal made by an experts' panel in this regard.
All 52,000 employees of APSRTC will now be treated as government employees in the Public Transport Department. Their retirement age will be increased to 60 years from existing 58 years on par with other government employees.
The services of all contract employees in the corporation will continue and they will now be treated as the contract employees in the Transport Department.
The merger will put an additional annual burden of Rs 330 crore on the public exchequer.
Transport Minister Perni Venkatramaiah told reporters after the cabinet meeting that an ordinance will be issued for the merger.
The modalities of merger will be prepared in 15 days and the entire process will be completed in three months.
Jagan Mohan Reddy, during his election campaign, had promised to merge the APSRTC with the state government. After coming to power in May, he formed two panels including an experts' panel to study the issue and make recommendations.
The APSRTC had accumulated losses of Rs. 6,373 crore. The government proposes to run more electrical buses to control the losses.
In another key decision, the cabinet approved the new sand policy. The sand will be priced Rs 375 per tonne and public can book the same online. A geo tracking system will be implemented to enable the customers to track the truck assigned to deliver the sand.
The YSRCP government had banned sand mining after coming to power, leading to sharp increase in sand prices.
In another decision, the cabinet approved a scheme to provide Rs 10,000 annual financial assistance to those driving their own passenger auto-rickshaws and cars. This will benefit four lakh beneficiaries. The government will set aside Rs 400 crore for this scheme.
( With inputs from IANS )