The recommencement of the train service between Batticaloa and Valachchenai on April 12, 2003 after a lapse of six years, is one of the many confidence-building measures undertaken by the Government under the Ceasefire Agreement signed with the Liberation Tigers of Tamil Eelam (LTTE). This project was facilitated under provisions of the Ceasefire Agreement (Article 2.9) with the aim of expanding the transportation network to parts of the Eastern Province, and thus enabling the movement of people and goods. This rail line was rendered unusable for the past six years due to damage caused by fighting associated with the conflict.

Resumption of rail services to the terminal station at Batticaloa will have a significant impact on the region and on the country at large. Among the benefits expected are increased tourist and freight traffic to the east coast due to cost factors, and employment generation associated with the construction and operation of the railway. Perhaps the most tangible benefit, however, will be the increased mobility of people and cargo from areas in and around Batticaloa to other areas of the country and the associated social and economic development.

The project has been partly funded by NORAD and the Government of Sri Lanka. It should be noted, however, that the project is still very much a work in progress. Further funds are anticipated from the European Union to reinforce the tracks, enhance signaling systems, and build related infrastructure such as railway stations and staff quarters.