With the rupee closing in on a decade high against the dollar and the foreign capital inflows remaining fairly strong, the Government has announced a new set of measures for the beleaguered exporters, especially the small and medium ones. In an official release issued on Saturday, the Finance Ministry says that the Government has taken four new steps to reduce the misery of exporters from the relentless surge in the rupee.

These measures are: increase in the number of services for refund/exemption of Service Tax with regard to exports, provision for earning interest on EEFC balances, extension of period & widening of coverage in respect of interest rate payable on rupee export credit and provision of Rs3bn more for the Vishesh Krishi and Gram Udyog Yojana (VKGUY).

The Government has extended refund of service tax paid by exporters on additional three taxable services, which are not in the nature of "input services" but could be linked to export of goods. The three taxable services are: General Insurance Services, technical testing and analysis services and inspection and certification services.

On September 17, the Government had announced refund of service tax to exporters in respect of four services (port services, transport of goods, transport by railways and other port services) for export purposes.

In addition, the Government has decided to permit all exporters to earn interest on EEFC accounts to the extent of outstanding balances of US $ 1mn per exporter. This is a purely temporary measure and valid up to October 31, 2008 and would be subject to further review.

Currently, EEFC accounts are permitted to be maintained in the form of non-interest bearing current accounts. It will now be possible for account holders to maintain outstanding balances to the extent of US $ 1mn in the form of term deposits up to one year maturing on or before October 31, 2008.

The rate of interest may be determined by the banks. Necessary amendments to the Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2000 are being issued separately.

The Government has also decided to expand the coverage regarding provision of interest subvention of 2% p.a. to all banks in respect of rupee export credit to the specified categories of exporters. The interest subvention scheme would now also apply to jute and carpets (Textiles) and processed cashew, coffee and tea (Processed Agricultural Products).