Indian Defence Minister Manohar Parrikar asked his counterpart, Gen Nakatani, during their March 30-31 meeting in Tokyo, to offer the Soryu but the Japanese side remained "non committal," the MoD source added.
Indian Navy officials and submarine experts are also divided about whether the Soryu class could serve Indian Navy requirements.
"To make a comparison with German 214 or Scorpene, the Soryu-class is considerably larger than either the Type 214, Scorpene or even the Russian improved Kilo, and can carry a much heavier weapons load," said Probal Ghosh, senior fellow at the Observer Research Foundation. "They are seemingly quieter and longer-ranged than the other boats on the market. Cost-wise it is comparable to the other subs. But the designed life of Japanese subs is only 20 years, which is much less than what the other subs are designed for."
Some officials also wondered whether the Soryu can fire Indian-made missiles.
"Soryu-class submarines are a recent induction in Japan." said Shyam Kumar Singh, a retired Indian Navy captain. "It is a conventional diesel electric submarine with AIP from Kockums. They are very potent and capable of carrying torpedoes and Harpoon missiles. They seem to be at par with German submarines. The only catch is that the Indian Navy would like to have bigger and indigenous missiles."
According to a senior Japanese defense analyst, officially no talks were conducted on the issue during the meeting between the two defense ministers. While the Japanese side is aware of India's position and interest in Soyru-based technologies, Japan is taking a cautious approach to any additional deal with India because it is focused on finalizing the sale to New Delhi of some 15 to 18 ShinMaywa US-2 amphibious search-and-rescue planes before tackling new business.
"Japan is new to complex arms and technology agreements with third countries, and it has no experience in offsets," the source said. "It has been said that India wants up to a 30 percent offset for the US-2 deal, and Japanese negotiators are unsure how to conclude the agreement."
Alessio Patalano, a Japanese naval expert at King's College, London, said part of the problem is that the Soryu class is more technologically advanced and stealthier than competitive diesel vessels, meaning there might be limited commercial advantage in a deal for submarines that were perhaps beyond what India needs, would be difficult for India to build and difficult for an experienced Japan to work out technology transfers.
"There are three reasons that make Japanese reluctance understandable," Patalano said. "The first is operational. The Soryu's design is maximized to favor longer patrols and operational flexibility [hence the larger size], both features being not particularly relevant to India's requirements. The second concerns the limited commercial advantage of this deal. Indian shipbuilding industry has limited capacity and a track record that is less than stellar. ... The third aspect concerns reputation. Japan is still learning its ropes in defense-related cooperation/sales, and an Indian experience might be problematic. If you're the new kid in town, you don't want your reputation to be tarnished before you have established it."
Meanwhile, overseas defense shipyards including France's DCNS, Germany's HDW, Spain's Navantia and Russia's Rosoboronexport are likely to forge tie-ups with domestic shipyards to compete in the upcoming submarine tender, but none have been settled.
An Indian Navy official said that while the Soryu-class submarines are quieter and can take a heavier load, it is still not certain India would buy the heavier vessels.
After coming to power in May 2014, the Narendra Modi government canceled an earlier proposal to acquire the submarines from the global market under Project 75-I and reserved the acquisition only in the Buy and Make (India) category.
Under the Buy and Make (India) category, the overseas shipyards will have to transfer technology to the domestic shipyard to compete in the tender but the Japanese are known to be reluctant to part with advanced technology, the Navy official said.
"I do not see that [transfer of technology] as a problem since there are indicators that the Japanese would transfer the design to the Australian Navy," Ghosh said. "In case they are not willing to give the design, then they would not be considered for P75."
The acquisition of conventional submarines under Project 75-I is already delayed by seven years, and so are the French Scorpene submarines being license-produced by Mazagon Docks. Purchasing submarines in the Buy and Make (India) category also causes delays because the whole process has begun afresh, the official added.
India's submarine strength has fallen from 21 in 1986 to 14, which includes Russian Kilo-class vessels acquired between 1980 and 2000, four aging HDW-class submarines and one nuclear submarine bought on lease from Russia two years ago.