"Although the poultry industry is growing at a rate of 15 per cent annually, Sri Lanka's per capita chicken consumption is only 2.8 kg compared to per capita consumption of some 40 kg in other Asian countries," said Feroze Noon, finance manager of Bairaha Farms Ltd.

"There is vast room for growth, but the consumer's disposable income is poor," he told Reuters in an interview.

"Our cost of production is also high compared to other neighbouring producer countries," Noon said.

Bairaha Farms controls some 23 per cent of Sri Lanka's 10 billion rupee ($143.62 million) poultry market. Prima Ltd of Singapore, unit Ceylon Grain Elevators Ltd and several small-scale producers make up the balance.

Noon said poultry consumption in Sri Lanka should be higher as Buddhists, who form 69 per cent of the population, did noteat red meat but chicken and fish.

However, high cost of poultry products forced them to substitute chicken with vegetables for their protein intake.

"The government needs to make consumers more aware of the high protein content in chicken if it is to reach its goal of lifting per capita chicken consumption to five kg by 2000," Noon said.

He said although the government had spurred the poultry industry by slashing duties on imports, the imposition of the 12.5 per cent goods and service tax (GST) on poultry feed was weighing on production costs.

"Poultry feed makes some 70 per cent of production costs which are now hit by the GST. Imports also make 60 per cent of feed costs and are susceptible to exchange rate fluctuations," Noon said.

The government introduced the GST last April to replace its business turnover tax (BTT). The poultry industry was previously exempt from BTT.

Noon said the government needed to encourage local farmers to cultivate some of the industry's raw materials like maize andsoya to cut down on production costs.

"Further government incentives for poultry firms to expand their capacities will also bring about economies of scale and reduce costs," he said.