Chandy who is currently in Delhi, Monday met Congress president Sonia Gandhi and former defence minister A.K. Antony to discuss the issue.
However, while keeping his cards close to his chest, Chandy told reporters in Delhi he has already made it clear the rejig would be discussed in three stages.
"First, I will discuss it in my party, then in the United Democratic Front and finally, with my party high command. The discussions will begin in the state and not from here," he added.
According to informed sources, Speaker G. Karthikeyan will become a minister and will be replaced by Minister for Rural Development K.C. Joseph, known to be Chandy's closest aide in the present cabinet.
Taking into consideration the seniority of Karthikeyan, he will be given the revenue portfolio while incumbent Adoor Prakash will be made in charge of the health portfolio.
"What remains to be seen is if K.B. Ganesh Kumar, who represents the Kerala Congress (Pillai), an ally of the UDF, is reinducted as a minister. If that happens, one of the ministers from the Congress will have to move out of the cabinet."
The source said Chandy wishes to induct one or two fresh faces but then he will have to drop two ministers and unsettle the erstwhile "I" faction led by Home Minister Ramesh Chennithala.
"With Chandy putting up a good show and securing 12 of the 20 seats in the Lok Sabha election when the party fared poorly across the country, he may put his foot down and finalise the cabinet rejig," the source added.