The Island newspaper quoted the Pubudu Sumanasekara, the Alcohol and Drug Information Centre (ADIC), an anti narcotics advocacy as saying that domestic cigarette production which was 6,600 million and dropped to 4,277 million in 2012.
It was not clear whether 'beedi', made by small industries and so-called 'white cigarettes' are also going down.
In the first quarter of 2012, Ceylon Tobacco Company had reported a further 15 percent drop in sales as the economy slowed following a balance of payments crisis.
Sri Lanka has brought laws outlawing mass media advertising and sports promotion of tobacco much earlier than many other Asian nations, when global tobacco firms shifted their focus to the region as laws began to bite in the West.
The Island quoted a doctor at Colombo Medical Facility Mahesh Rajasuriya as saying that the industry was finding ways to promote their products through point of sale advertising in shops (so-called below the line advertising) and packaging.
Sri Lanka's Ceylon Tobacco Company has been gone to court over graphic labeling of packs adorned with diseased lungs and cancer. Such regulations were first introduced in countries like Canada.
In addition to nicotine, which is the active narcotic ingredient, cigarettes also deliver chemical compounds in its smoke which have been found to be carcinogenic and also cause heart and circulatory conditions.
In addition to being addictive, which reduces free choice, critics have said that tobacco kills even when used as directed by the manufacturer, a similarity the industry shares with armaments, unlike other products where mis-use and overuse causes negative effects.
The Island quoted a health ministry spokesman as saying abut 21 percent of Sri Lankan men and 0.8 percent women were addicted to smoking.
Tobacco use spread around the world after Columbus discovered the America's and it because more popular with the invention of tobacco rolling machines, which made tobacco smoking cheaper compared to hand-rolled cigars.