Indian and Chinese firms have already been given contracts to rebuild or modernise other parts of the rail network in the north and south of the island.
It said the Cabinet had approved a deal to rebuild the Northern Railway Line signaling and telecommunication system to be given to the Indian Railway Construction International at a total cost of 86.
5 million US dollars.
The track was destroyed during the 30-year ethnic war which ended in May 2009.
The state-owned Ceylon Government Railway is also to enter into a contract with China National Machinery Import and Export Corp (CM) l to develop the southern Matara Beliatta railway line at a cost 290 million dollars.
The contract will include the signaling and telecommunication system, the ticketing system and their maintenance, the statement said.
Sri Lanka is rebuilding and extending the railway network with the end of the war.
The government intends to make the railway carry a bigger share of the passenger and cargo loa