The Agriculture sector recorded a healthy growth of 4.7 % in value added terms in 2006 and continued to be the backbone of Sri Lanka’s economy with its contribution of 16.8% to GDP, 24% of total export earnings and 32% of national employment generation. Apart from that, with more than 72.2% of the population living in rural sector and 80% of that engaged in agro-based activities, the development of agro based industries, as a rural development strategy has become vital in the development process of Sri Lanka. The economic linkages between the agricultural producers and processing industry within the country would not only enhance the rural incomes by generating employment opportunities, but also would increase the purchasing power of rural poor, shifting them above the poverty line. The forward and backward linkages within the sector would generate multiplier effect since the development of the sector would simultaneously benefit the other sectors as well, thereby would establish a strong foundation in economic development process. Thus, the sector has significant scope for capacity expansion and domestic employment creation. However, the private investment required to finance such growth is also very high indeed. Having identifying the need, the government of Sri Lanka has created an enabling environment for private sector to earn a reasonable return on its investment in the agricultural sector.