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Does the Govt. of India has any restriction in formation of new union territories? If yes, what are the options left for those regions with strong justifications for a separate status from the existing state?

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Indian Parliament, as per the Article 3 of Indian Constitution, has the powers to form and admit any new state/UT to Indian Union, by tabling a bill in Parliament on the President's recommendation for amending the first schedule of the Constitution after due consultations with the legislatures of the affected states.

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