For the time being - I handled my requirements with a different approach.
Note: I didn't check if that could be possible with hooks or other customisations over the select field.
Maybe there is a workaround with that approach.
But here is my solution.
Created a Settings Page for that post type.
Created a field for the settings page. It will accept the values (or the combination values - labels) that we want for the select field. Set the field as clone-able. Create some sample entries for the field.
Then for the original select field that we want those values - use the callback: callable_function for the options.
In functions.php - create the callable_function - make it get the values from the settings page - prepare the options and return them for the select field.
Later on, if the user needs to add more values (not on the fly though while editing/creating the post) - he can go and add more values from within the settings page.