Contraband tobacco is still a big problem in Canada, says a group partly funded by businesses that make or sell cigarettes.

Despite new powers given police to crack down on contraband dealers, sales of bootleg smokes are on the rise in Atlantic Canada, the National Coalition Against Contraband Tobacco said Tuesday at an Ottawa news conference.

The coalition said criminal organizations in Ontario and Quebec have also adapted to new laws designed to curb the problem.

"The Canadian, Ontario and Quebec governments have all given police new powers to investigate and charge those that traffic in the trade," said coalition spokesman Gary Grant.

"But the illegal cigarette industry continues to evolve to compensate."

The coalition, which is backed by convenience stores, retailers, tobacco manufacturers and growers, among others, says it's awaiting an extensive anti-contraband report from the RCMP.

That report, reviewing the state of contraband since 2008, was expected to be released by the end of last year.

In the absence of concrete data from the Mounties, however, the coalition said contraband smuggling and production is on the rise in the Atlantic provinces, while some reductions have been seen in Quebec.

"We use our sources and all our colleagues (to gather information), including the RCMP, which are still effective in providing statistics," said Grant.

Senate committee review starts this week

A Senate committee will review legislation Wednesday, which was introduced by the Conservatives in March, to toughen penalties for selling contraband tobacco.

Bill S-16 would set mandatory minimum sentences for anyone convicted of trafficking in contraband tobacco under a new Criminal Code offence. If it becomes law, it would also create a new, 50-member, RCMP anti-contraband force.

The aim of the force, is to have a "measurable impact" on reducing contraband tobacco and combating organized crime networks, the government said when the legislation was introduced.

The maximum penalty for a first offence would be six months imprisonment for a summary conviction and up to five years for an indictable offence.

But police need even more powers to combat the contraband trade, said Grant.

The coalition also urged all levels of government to find ways of co-operating with First Nation communities to tackle the problem, accusing "criminals" in aboriginal communities of harming their own people.

"These organized criminals are victimizing our kids and starting a whole new generation of smokers," said Grant.

Critics, however, say the proposed law has nothing to do with preventing health problems related to smoking and everything to do with the revenue lost by businesses and governments through the contraband trade.

Last week, the Mohawk Council of Akwesasne said it received a $476,115, two-year grant from the Ontario government to better regulate tobacco production.

"The Mohawk Council of Akwesasne has been working with the government of Ontario for the past year to build a more co-operative relationship around common interests," said Grand Chief Mike Mitchell.

But the council complained that it was not consulted by Ottawa before Bill S-16 was drafted.