• Over one billion illicit cigarettes smuggled in last year
• Nearly 10,000 kg increase in narcotics between 2023 and 2025

Illegal cigarettes and narcotics smuggling has reached unprecedented levels in Sri Lanka, posing a direct challenge to public health, Government revenue, and national security with over a billion illicit cigarettes being smuggled in last year and close to a 10,000 kg increase in narcotics between 2023 and 2025.

Sri Lanka’s regulatory environment – marked by high excise taxes on cigarettes – has inadvertently fuelled a thriving parallel market for smuggled tobacco products. 

In 2024, the total market for smoked tobacco products (including legal cigarettes, beedi, and smuggled sticks) reached about 9.7 billion units. Legal sales shrank to 20%, from 24% in 2023, as the illicit market expanded to a 12% share from 9% the previous year. 

Notably, the Ceylon Tobacco Company (CTC) reported that over a billion sticks of illicit cigarettes flooded the market during 2024, driven by widening price gaps between taxed legal products and their illegal counterparts.

The consequences are profound: Government tax losses, weakened consumer protections, and a surge in products that bypass statutory health warnings. The recently released Institute of Policy Studies (IPS) ‘Tobacco Smuggling in Sri Lanka – A Scoping Study’ highlights that illicit cigarettes are not only cheaper but also substantially more dangerous, given their lack of regulatory oversight.

Recent enforcement efforts have achieved notable successes. In 2023, Sri Lanka Customs ordered the destruction of 5.49 million counterfeit ‘Marlboro Gold’ sticks worth Rs. 152 million, which had been smuggled in a consignment disguised as A4 paper. 

Additional raids have revealed cigarettes concealed in household goods, furniture, and washing powder boxes, with penalties and forfeitures imposed on both the goods and the individuals involved.

However, Customs Director Chandana Punchihewa told The Sunday Morning that quantifying whether the increase was due to a genuine uptick in smuggling or improved detection remained difficult. 

“Yes, there is clearly an increase in illegal substances coming into the country, including cigarettes. We cannot clearly say whether the increase is because it is due to an uptick in smuggling or because our detection methods and investigations have become better and more frequent, especially with the introduction of new scanners at the airport.”

State-of-the-art radiation and chemical detection equipment and scanners were donated to Sri Lanka Customs by the US Embassy earlier this year while two scanners manufactured in Germany worth Rs. 50 million were installed by the Customs Department at the Bandaranaike International Airport in September.

Punchihewa further explained that, due to the legality of cigarettes, culprits caught with illicit tobacco were penalised with fines rather than jail time – fines often paid by third-party black market operators.

“By law, smuggling cigarettes is punishable by fines, not jail time. However, there is a clause that states that if the accused fails to pay the fine, they may be produced before courts where a penalty of Rs. 25,000 or a short jail term can be imposed. In this instance, they will pay the Rs. 25,000. A lot of the time there are people in Colombo ready to pay the fine,” Punchihewa added, emphasising that penalties were often circumvented and suspects were quickly released.

Narcotics smuggling: A graver menace

Unlike tobacco-related crimes, narcotics offences carry severe penalties, including jail time. 

“Criminals attempting to bring in narcotics are taken to courts and a case is filed. Depending on the substance and the quantity, a lot of the time they do not get bail,” Punchihewa explained. 

According to records, Police and Customs seizures of heroin, cannabis, cocaine, and other drugs have escalated sharply in recent years. For example, in 2025 (up to 10 October), the Police confiscated 1.48 metric tonnes of heroin, 14.4 metric tonnes of cannabis, and multi-million quantities of other controlled substances, leading to more than 58,000 arrests for heroin alone.

In 2023, 850 kg of heroin and 10.2 metric tonnes of cannabis were confiscated by the Police, indicating a sharp increase in narcotics entering the country within a span of just two years. 

Punchihewa, addressing the economics driving tobacco smuggling, said: “There is a huge gap between the market value of a cigarette and the cost of production, particularly in Sri Lanka’s market. Therefore, the profits are very high for a smuggler. One individual we apprehended told us that even if he managed to smuggle out a few cartons a month that was fine. As long as there is a demand for cheaper cigarettes and high profits for the smuggler, there will be a black market. It is not an easy task to reduce illicit cigarette smuggling but we are doing what we can.”

The demand is not purely price-driven. As Krishan K.A., a regular procurer of illicit cigarettes, explained: “Earlier I would have to go all the way to Negombo to buy these cigarettes and I would have to buy larger quantities so that I didn’t have to do multiple trips. Now I can get them from the Maligawatte area.” 

He emphasised that menthol cigarettes, not available legally, were driving consumers towards the black market: “More than the price, I buy it because I prefer menthol cigarettes. So I either bring down a carton myself if I go overseas or just get them from the black market.”

Evidence from the IPS report reveals that many conventional explanations for the surge in smuggling – such as tax hikes – do not fully explain the phenomenon. Customs seizure data does not support the narrative that higher taxes trigger spikes in smuggling; instead, gaps in institutional capability, porous borders, and corruption play a more significant role. 

The IPS counsels against simplistic solutions, recommending a more nuanced approach involving strengthened supply chain tracking, advanced technology deployment (including digital excise stamps), inter-agency cooperation, and public engagement.

Sri Lanka’s experience is mirrored by trends in South Asia and beyond. In the Maldives, cigarette smuggling has soared after Sri Lanka raised import duties – a reflection of inadequately harmonised regional policy. 

Smugglers have demonstrated increasing ingenuity, using containers, modified parts, and household goods to conceal illegal products. International law enforcement cooperation, cargo scanning, and digital manifest verification stand out as essential future steps.

Severe health implications

The health implications are severe: unregulated cigarettes lack statutory health warnings, posing dangers to young and income-constrained consumers who are drawn to their low prices. 

Medical experts warn of heightened disease risk, while the IPS notes a “double blow” to Sri Lanka – rising healthcare costs and substantial lost revenues. According to IPS estimates, seized contraband represents less than 0.2% of total illicit supply, suggesting the vast majority of illegal cigarettes penetrate the market undetected.

IPS advocates for a holistic response: digital tax stamps, technology-driven supply chain auditing, enhanced inter-agency intelligence, and rewards for whistleblowers. Continuous monitoring, ‘smart enforcement,’ and transparent accountability frameworks are necessary to counter corruption and adapt to rapidly evolving smuggling methods. 

Only with committed public support, modernisation of enforcement, and flexible regulatory adaptation can Sri Lanka expect to reduce the scale and impact of smuggled cigarettes and narcotics.

International approaches

Sri Lanka should also look at how this issue is tackled by the international community. Spain and the United Kingdom have robust methods of handling illegal cigarette smuggling. 

Spain is noted for successfully reducing cigarette smuggling by targeting supply rather than street-level distribution. Cooperation with neighbouring countries, such as France and Andorra, alongside European Union bodies, has been key. 

Actions included sealing borders, patrolling smuggling routes, and applying political pressure for legislative changes. This resulted in a significant drop in contraband cigarettes and increased legal sales and tax revenues.

Meanwhile, the UK introduced a cutting-edge Track and Trace system in 2021 that assigns a unique identifier code to every tobacco product, enabling officials to track cigarettes through the supply chain from manufacture to sale. This technology helps detect counterfeit products quickly and supports law enforcement in intercepting smuggled cigarettes. The UK also targets organised crime networks internationally and enforces strict penalties for illicit tobacco sales.

Illegal cigarettes and narcotics smuggling in Sri Lanka constitute an enduring threat – one shaped by powerful economic incentives, regulatory gaps, and persistent market demand. 

As Customs technology improves and authorities adapt, fresh challenges are bound to emerge, requiring investment in digital tracking, international collaboration, and robust legal reform. Success depends not simply on punitive fines but on deeper reforms, social participation, and constant vigilance.