A proposed Sri Lankan flour mill, promoted by a Dubai group, says it expects to capture a third of the local market.

Serendib Flour Mills (Pvt) Ltd says construction of its $53 million mill will begin next year.

The project, backed by units of Dubai's Al Ghurair Group, received Sri Lankan government approval last year but delays were incurred over obtaining a site at Colombo port.

"Construction activities will take about one year and commercial operation is expected to commence by the third quarter of 2003," chief financial officer Firdowsy Ismail said.

Sri Lanka liberalised wheat imports in April last year. The country's only flour mill, owned by the state, was sold to Prima Ceylon Ltd for $65 million.

Serendib expects its mill to have an initial capacity of 300,000 tonnes annually.

"The current demand for flour in Sri Lanka outstrips supply," the company said in a statement.

"Industrial users like confectioners import their supplies due to non-availability of the required quality and quantities," it said.

There is no wheat production in Sri Lanka, so the country imports about 900,000 tonnes each year to meet domestic requirements.

Serendib said it would consider exporting both bran and flour in case of excess capacity in the future.

The Al Ghurair group currently exports flour to Sri Lanka, Bangladesh, the Maldives, Indonesia and Africa.

The units of Al Ghurair that invested in Serendib Flour Mills - National Flour Mills and Emirates Trading Agency of Dubai - have a combined turnover in excess of $4 billion.