Rao, who held a meeting with officials on the probe, said the government is keen on nipping the drugs menace in Telangana in the bud, according to a release from his office.
Dismissing allegation that the Telugu film industry has been singled out in the investigation, Rao said the government would only punish the guilty.
The menace of drugs is not rampant in Hyderabad and the government is conducting a thorough probe to eliminate the probelm when it is still in early stages, Rao said.
Quoting data provided by the Narcotics Control Bureau (NCB), the officials, at the meeting, told Rao that Telangana is not among states where substance abuse is high.
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The officials said 12 people from the film industry and 27 others have been examined so far. Twenty-two people, including two foreigners, have been arrested in connection with the racket, according to the release.
They said drugs have been found to be coming to Hyderabad from countries like Spain, Thailand, Portugal, Nigeria, the Netherlands and Colombia.
The racket, which came to light in first week of July, involved supply of high-end drugs such as lysergic acid diethylamide (LSD) and methylenedioxy-methamphetamine (MDMA).
The investigators suspect film personalities, employees of MNCs, school and college students were among clients of the drug peddlers.