This is partly correct. While you can exercise your right of participating in the State Counselling, if you want to leave the seat offered in Round 2 of All India Round Counselling, you will have to forgo the security deposit. For example, if a Candidate has been alotted a seat in Round  and doesn't want to accept it, there is Free exit option that he/she can utilise and there is no penalty involved. But if you want to quit the seat allotted in Round 2 and move to State Counselling, you have to forgo the security deposit that you paid while registering for All India Counselling. This is a choice that you have to make.