The narcotics were being smuggled to East Godavari from Pedabayalu inside an oil tanker, which was intercepted near Chintalaveedhi by Paderu police following a tip-off.
This is third time in recent days that an oil tanker was being used to smuggle the green drug to evade the enforcement officials.
Deputy Superintendent of Police, Paderu, Mahendra Mathe said the arrested were identified as Kantama Reddy Durgi Naidu (native of Atchutapuram), K Rajesh (native of Boithili) and M Naveen (native of Tuni), while one more accused K Rajesh managed to flee from the spot.
The police also seized Rs two lakhs in cash and three mobile phones from the gang.
A case has been registered under the NDPS Act and investigation is on to nab the masterminds in the case.