* Iran also offering discounts on increased crude sales -sources
* About $5.3 billion in oil payments held up in India -sources
NEW DELHI, Nov 7 (Reuters) - Iran is offering free delivery of crude to major client India, industry sources said, signalling that tough Western sanctions which have slashed its exports in half are driving Tehran to increasingly desperate measures to keep oil flowing.
The United States has yet to ease the pressure on Asian buyers to continue reducing purchases from the OPEC member, even though Iran and world powers began two days of talks on Thursday hoping to reach a "first step" towards ending the decade-old standoff over Tehran's disputed nuclear programme.
The drop in exports is costing Iran billions of dollars in lost revenue every month. Tehran is also unable to repatriate most of the money earned from oil it does manage to sell, as the sanctions have cut off bank transfer facilities, crippling its economy by choking off its biggest revenue stream.
Despite the near halt of petrodollar payments, Iran is resorting to measures such as offering deep discounts on oil and now free delivery to India, according to sources who requested anonymity because of the sensitivity of the issue.
Iran's remaining Indian clients - Mangalore Refinery and Petrochemicals Ltd, Essar Oil and Indian Oil Corp - could save freight of 70 cents to $1 a barrel on purchases from Iran, said one of the sources.
Tehran is also offering Indian buyers a discount on price if refiners raise purchases, the sources said.
"The more you buy, the more incentives you get. If a refiner buys 30 million barrels of Iranian oil in a year then the discount translates to 25 cents per barrel," this source added.
Iran already offers 90 days' credit on crude sales to Indian refiners while most other producers stick to 30 days' credit.
While any discount would be attractive as India tries to curb an oil import bill that was around $170 billion in 2012/13, it likely would be wary of raising imports just prior to a review of its waiver from U.S. sanctions.
India's six-month exemption comes up for renewal in early December, shortly after top U.S. energy diplomat Carlos Pascual's current visit to New Delhi.
Sources have said the United States is unlikely to allow Iran's exports to rise before a deal is struck with Tehran. Both sides involved in the Geneva talks have said a breakthrough was far from certain.
India so far looks well on track to meet U.S. conditions to renew its waiver. Daily imports from Iran slid 34 percent in June-September from the six months between December 2012 and May 2013, data from trade sources shows.
India is one of Iran's few remaining clients along with other Asian buyers China, Japan and South Korea.
In India, there is about $5.3 billion of Iranian oil money held up by the sanctions. Of the total, about $1.8 billion is with the oil companies who have bought crude from Iran and the remainder is held with a bank, sources said.
In South Korea, total Iranian money stuck in bank accounts is more than $5 billion, a source with direct knowledge of the matter said.
In Japan, a similar amount of Iranian oil money has been held up since the beginning of the year, according to sources.
(Additional reporting by Meeyoung Cho in SEOUL, Osamu Tsukimori in TOKYO; Editing by Tom Hogue and Manash Goswami)