Sri Lana's government plans to deregulate railway freight rates and invite private sector participation to increase movement of goods by rail, according to a new transport policy unveiled recently.

"Railway freight tariffs will be de-regulated and the Sri Lanka Railways will be permitted to determine tariffs competitively to attract freight transport from road to rail," the draft policy statement said.

The move is part of a series of measures to revive the heavily loss-making state railway service and shift movement of people and goods from road to rail.

The government expects to increase the share of passengers using rail to 10 percent by 2016 from six percent now, and freight to five percent from one percent now.

"Sri Lanka Railways will collaborate with the private sector towards achieving this objective," the policy put out by the transport ministry said.