Diplomats on Friday said Haider was the frontrunner but UN officials said no formal decision has yet been taken.
UN Secretary-General Kofi Annan was to have chosen a special representative by Friday, but the announcement was delayed because of his travels.
A frequent commentator on international affairs, Haider was critical of the US-led invasion and occupation of Iraq.
A Cambridge-educated Muslim, Haider was India's foreign secretary from 1995 to 1997. He was also India's ambassador to the United Kingdom in 1998 before retiring from the diplomatic service.
Diplomats gave credence to Haider's candidacy after he was interviewed by Annan in Qatar last week and came to UN headquarters in New York this week.
"He is a leading candidate," said Romanian Ambassador Ioan Motoc.
Other candidates mentioned were former Thailand foreign minister Surin Pitsuwan and Ashram Jhansi Ai, Pakistan's ambassador to the United States.
The post has been vacant since August last year, when a bomb exploded at UN headquarters in Baghdad killing special representative Sergio Vieira de Mello and 21 other people.