Over the past two years, illegal sales were detected 28 times at retailers throughout Sydney, including at Haymarket, Glebe, Marrickville, Earlwood, Ashfield, Harris Park, Auburn, Wakeley, Strathfield, Punchbowl and Canterbury. Of those, 13 have not yet been successfully prosecuted.

Despite the emerging problem, the health department's powers extend only to photographing and taking samples of illegal tobacco, and inspectors are unable to seize the products. It called for laws to be strengthened.

Contraband tobacco is typically sold cheaply, undercutting the price of legal products. It is usually imported from overseas and avoids quarantine, health checks, taxes and plain packaging warning people of the danger of smoking. It can also contain noxious chemicals and mould.

Health inspectors say retailers caught with illegal tobacco frequently claim it is not for sale, despite possessing large quantities beyond that which could reasonably be considered for personal use.

British American Tobacco Australia has suggested its own fix to the growing market for illegal "chop chop", or unbranded loose tobacco, saying it will consider launching a cheap "make your own" cigarette brand to compete for market share.