"LIC would be asked to pick only small portion (5-10 per cent) in some PSUs," Finance ministry sources told PTI.
The cash-rich LIC had earlier said that it has earmarked over Rs 40,000 crore for investment in equities in public and private sector companies in the current fiscal. LIC is the largest domestic institutional investor in the Indian market.
The government has fixed a mammoth Rs 40,000 crore disinvestment target for the current fiscal. However, with eight months over, it has only been able to mop up Rs 1,145 crore.
In order to meet the target, the government is mulling innovative measures, like buyback and cross-holding. Under the buyback mode, the government can raise money by selling its equity in the company to the concerned PSU itself.
The Department of Disinvestment (DoD) has already floated a Cabinet note which seeks to ask cash rich companies to buyback shares in PSU peers.
The government has been thinking of raising funds through the buyback route as it has not been able to raise money through sale of equity in public sector units on account of uncertainty in the stock markets.
Such companies may be asked to buy back about 5 per cent equity from the shareholders.
Under the current regulations, market regulator Sebi allows companies to buy back their own equity from shareholders.