The gang was taking the logs from Badvel in Kadapa district to Chennai via Anantapur district in five vehicles.
A senior police officer said the contractors pay Rs 30,000-Rs 40,000 per week to a woodcutter and hire them for cutting red sanders trees in the forest.
Preliminary enquiry revealed that the red sanders found in the possession of the accused were cut down in the Seshachalam forests.
The Prakasam police have arrested an inter-state red sanders logs smuggler Magunta Viswanadha Reddy, who has been eluding the police since the past six years.
Red Sanders Anti-Smuggling Task Force team arrested three accused involved in illegal transportation of logs from the forest area.
The government also issued another order constituting a team to coordinate in the auction process, and take steps to notify the lots that can fetch more revenue.