Two weeks ago the current Iranian Government of President Mohammad Khatami distanced itself from the original death threat.

As a result of the announcement, Britain and Iran agreed to upgrade their diplomatic relations and exchange ambassadors.

Mr Rushdie, who has spent nearly 10 years living in hiding, said the announcement meant "freedom at last".

Iranian Foreign Minister Kharrazi distanced his government from the fatwa

But more than half of the Iranian parliament signed a letter last week saying it did not back their government's position on Mr Rushdie and that the death threat still stands.

Mr Rushdie's supporters have dismissed the new threat, saying the students are insignificant hardliners fighting against the political tide which has seen Iran become more moderate in recent years.

Determined to carry out threat

The Association of Hezbollah University Students said, in a letter of protest to Tehran's Foreign Ministry, that it was determined to carry out the original death threat issued against Mr Rushdie.

They told the newspaper Kayhan that they would pay one billion Iranian riyals (about £190,000) to anyone who succeeded in killing the author. The newspaper did not say where the funds would come from.

The students wrote: "Your issuing of a joint statement with the British foreign minister about Salman Rushdie and the historical edict of Imam Khomeini ... caused deep regret and sorrow among Iranians and all over the Muslim world."

A Foreign Office spokesman said: "We are aware of these reports, but have not seen the text of any statement from this organisation.

"It is clearly not a statement which has any official backing from the Iranian authorities. Our agreement is with the Iranian Government and it is that agreement that counts."