"This increase is aimed at encouraging the carrying out of the fatwa," Ayatollah Hassan Sanei, director of the Khordad-15 Foundation, was quoted saying.

Andy Beatt: Death bounty set by hardline groups "lacks official backing"

The bounty is promised to anyone who executes the 1989 fatwa, or religious edict, issued against Mr Rushdie for alleged blasphemy in his book, The Satanic Verses.

"We should not let this issue be forgotten,'' Ayatollah Hassan Sanei told the Iranian daily newspaper Jomhuri Eslami.

"To make the fatwa everlasting and encourage its execution, I have decided to raise the reward offered by the foundation.

"This reward for killing Salman Rushdie is a great honour for the foundation and we must preserve it.''

Ayatollah Khomeini issued fatwa shortly before his death

His promise to boost the reward comes just two days after a hardline Iranian student group offered $333,000 to anyone who carried out the fatwa.

It is the second time the foundation has increased the bounty. In 1997 it was raised from $2m to $2.5m.

Mr Rushdie, who emerged last month after almost a decade in hiding, is due to meet British Foreign Secretary Robin Cook in the next two days to discuss the developments.

Article 19, the human rights group which has championed Mr Rushdie's cause, was very concerned about Khordad-15's announcement.

Spokeswoman Frances D'Souza said: "The bodyguards stay for now. Salman's situation is being reviewed but I expect he will remain very cautious.

Rushdie: The bodyguards are staying

"We had deliberately been keeping quiet about (the bounty issue), thinking things needed to settle down. But we are getting increasingly worried.''

The fatwa has been at the centre of tension between Britain and Iran since the order was issued by the late revolutionary leader Ayatollah Ruhollah Khomeini shortly before his death.

Last month, Britain and Iran agreed to restore full diplomatic relations after Tehran distanced itself from the threat.

Iranian Foreign Minister Kamal Kharrazi pledged that Tehran had nothing to do with the foundation's reward and would take no steps to implement the edict.

Rushdie 'to burn in hell'

But Mr Kharrazi's declaration provoked an angry reaction from hardline conservatives in Iran.

At least 150 members of the 270-seat conservative-dominated parliament signed a petition last week describing the fatwa as a "divine order."

"The verdict against Rushdie the blasphemer is death, both today and tomorrow, and to burn in hell for eternity," it said.

The British Foreign Office said Iran did not back any bounty offer and the new reward would not affect last month's agreement.

But Ms D'Souza said no religious organisation could operate without state permission.

"The foundation has no money of its own so where's the money coming from? These questions have to be answered," she added.