The nationalist leader won May's parliamentary election by a landslide with a pledge to create jobs and revive Asia's third-largest economy, which is beset with the twin evils of weak growth and high inflation.
Yet Finance Minister Arun Jaitley's maiden budget last week drew criticism that his fiscal arithmetic did not add up. Capitalising on a record-breaking stock market run to complete asset sales could tip the balance.
The government will decide next month whether to sell a 5 percent stake in state-run Oil and Natural Gas Corp (ONGC), a senior oil ministry official said, in a deal that would be worth $2.9 billion at current market prices.
"The department of divestment has floated a note seeking our comments for a 5 per cent stake sale in ONGC," the official, with direct knowledge of the matter, told Reuters on Tuesday. He added that a decision would be taken in August.
An official at the finance ministry, which houses the divestment department, said the government was interested in selling stakes in ONGC and other state companies given their high market valuations. He did not elaborate.
If completed, the sale would raise more than a quarter of the $10.5 billion target for privatisation revenues announced by Jaitley for the fiscal year to March 2015.